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Aug 5, 2021
[4 min Read]
Market cap at publishing: $1.77B
Price at publishing: $26.86
Cognyte Software is a global leader in security analytics software. They provide services to governments and enterprises worldwide. The company's open software is used to successfully identify, neutralize, and prevent national security, personal safety, business continuity, and cyber threats. They have over a thousand governmental and private clients. Cognyte Software was incorporated in 2020 as a spinoff of one of Verint's business units and is headquartered in Herzliya, Israel.
The company was just spun off in March 2021 so there won't be any in-depth analysis on their financials or growth. I prefer not to compare the current stand-alone company with the past when they were still part of Verint as I believe they will do much better now as a separate entity and it won't be fair. Most of the in-depth analysis will be done on the stock price and how it compares to the rest of the industry. However, here are some financial highlights from their latest filing:
CGNT which is currently trading at $26.86 has a market cap of $1.7B. The stock is down 3% since its inception and is still 24% off its 52 week high of $33.37. I am comparing them with two other analytical software firms, Palantir and Fireye. Palantir is more of a general software firm that processes data across many industries while Fireye focuses on security like Cognyte.
You're not seeing things, Cognyte Software is highly undervalued compared to its peers. Yes, it appears Palantir is overvalued but maybe it's not, after all, Palantir's price has been steady for almost a year now. My point is that if Palantir is fairly valued or even close to it then the price of Cognyte Software should be $137.93!. That would be nice but let's not get ahead of ourselves, it's more likely that Palantir is overvalued than fairly valued. However, even compared against its closely related peer FireEye, Cognyte still looks cheap. Even more so when you consider that Cognyte is actually profitable and neither FireEye nor Palantir are and FireEye has a higher D/E ratio.
I think Cognyte Software is in a fantastic position to grow based on several factors including:
C'mon, did you think I wasn't going to throw in a picture of an internet money coin and not say the big “c” word? This company is a buy based on this image alone. /s
I use Damodaran's DCF analysis using free cash flow to firm to come up with a valuation. Here are the assumptions I made about future cash flows and all other inputs. Sorry, I know it's not the prettiest but there is a method to my madness. The present value I get from my analysis is $2.9B or $44.87/share which, compared to the current price would represent a discount of 70%.
I have a price target of $44.87 on Cognyte Software.
TL;DR: Good company making smart decisions in a great industry that will undoubtedly continue to grow over the years.
I have not initiated a position in any companies mentioned in this article however, I may purchase shares within the next 72 hours.
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