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You Might Want To Add Cybersecurity Tenable (TENB) Stock To Your Watchlist! | Behind The Stock #19 - YouTube
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Sometimes when it comes to investing
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you can't help but feel stingy
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Like when you discover a good investment opportunity
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that no one is talking about
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and you want to keep it a secret
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But well
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I鈥檓 very generous okay
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I鈥檓 sharing that secret with you guys
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Hey guys, I鈥檓 Alex
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Welcome to Behind The Stock
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where I dissect company information and annual report
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to discover and identify investment opportunities for you
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We upload new episodes every Friday
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And today, let鈥檚 talk about Tenable
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They鈥檙e listed on NASDAQ since July 2018
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While they鈥檙e not completely unknown to investors
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Tenable is certainly not as widely discussed
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as other cybersecurity stocks
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Now despite the company performing well
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Tenable鈥檚 share price dropped recently
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due to a weak 2021 guidance
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However, fundamental of the business is good
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So, could this be an opportunity?
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Well, let鈥檚 dive into Tenable
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Tenable is in the cybersecurity sector
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and the market leader in vulnerability management
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They鈥檙e a Cyber Exposure company that provides solutions
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for enterprises to manage
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and measure cybersecurity risk
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As mentioned, they focus on
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vulnerability assessment and management market
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What it means is that Tenable measures how much damage
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would be caused by a security breach
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How it鈥檚 done is using the Nessus software
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which is a proprietary vulnerability scanner
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developed by Tenable
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They鈥檙e the world鈥檚 first platform
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to see and secure any digital asset on any computing platform
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Tenable has a large and diverse customer base
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which includes more than 50% of the Fortune 500
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and more than 30% of the Global 2000
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and large government agencies
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Currently, over 30,000 organizations worldwide use Tenable
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In terms of how Tenable makes money
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the main bulk of their revenue is recurring from subscription
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It makes up over 90% of their revenue in 2019 and 2020
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The rest of the revenue is from perpetual license and maintenance
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professional services and others
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In terms of growth potential
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the cybersecurity industry as a whole is growing rapidly
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In fact, the global security and
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vulnerability management market size
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is expected to grow from
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USD 12.5 billion in 2020 to USD 15.5 billion by 2025
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This growth in the market is due to
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increasing number of cyberattacks
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more cyber awareness across developing economies
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and increasing mandates to regulatory compliances
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Besides that, more and more enterprises are going remote
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and using newer technologies like
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Internet of Things, cloud computing, and more
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These will require more efficient security and control measures
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So, that鈥檚 when Tenable comes in
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which enables a business to maintain visibility
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and control over the security of their assets
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It has become an essential part of business
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and more enterprises will require Tenable鈥檚 service
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In fact, Tenable added 460 new enterprise platform customers
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and 66 net new six-figure enterprise platform customers
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in the fourth quarter of 2020
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Looking at the growth strategy from Tenable鈥檚 investor presentation
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aside from getting new users
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the company is also looking to expand asset coverage
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investing more in tech
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exploring more acquisition opportunities
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So, in terms of Alex Meter
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I rate Tenable鈥檚 growth as very good
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Looking into the strength of Tenable as a company
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one of it is their intangible know-how
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Tenable has a strong R&D team
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which helps them be the #1
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in common vulnerabilities and exposures (CVE) coverage
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Zero-day research, and vulnerability management
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In the case of Zero-day research
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back in Nov 2019
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Tenable announced that they were the first and only
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vulnerability management vendor
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to surpass 100 zero-day discoveries in a single year
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The term "zero-day" refers
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to the number of days a software vendor
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is aware of the vulnerability
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In total, 147 Zero-day vulnerabilities
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were discovered in 2019
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and 141 were discovered in 2020
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The co-founder and chief technology officer of Tenable said that
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the company is building the
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largest vulnerability intelligence knowledge base
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and one of the largest security research teams
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in the industry
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With this expertise
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they can share with the community and help customers
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So, the more zero-days they find and disclose
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the faster and more accurate they can fix vulnerabilities
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Another competitive advantage of Tenable is
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their ability to lock in customers
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In the Q3 2020 earnings call with CEO Amit Yoran
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he announced that Tenable鈥檚 dollar-based net expansion rate
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is at approximately 110%
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This means that customers are renewing their subscription
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to Tenable鈥檚 services
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So, in terms of Alex Meter
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I rate Tenable鈥檚 competitive advantage as pretty strong
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As for the risks that Tenable has to face
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one of them is competition
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For example, Rapid7 is growing at a similar rate
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in the vulnerability management space
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Other rivals include Qualys
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and even those with smaller market share like IBM
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As companies like Rapid7 and Qualys remain as threats
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and Tenable will have to continously spend on R&D
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to differentiate themselves
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Another potential risk for Tenable is
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budget cuts amongst enterprises
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Given the current environment
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businesses may be facing a lot of uncertainty
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and lack clarity and visibility
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in their business operations
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Their customers or potential customers
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might not be willing to spend and
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may be delaying in IT software contracts
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So, in terms of Alex Meter
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I rate Tenable鈥檚 risks as medium to high risk
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Now, let's look into the financial part of Tenable
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Looking at the revenue
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their revenue is growing strong
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However, do take note that
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currently they are still a loss-making company
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Looking at their gross profit margin
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they able to hit a pretty high gross profit margin of
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more than 80% consistently
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Looking at their debt
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they have a 0.39x debt
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It's relatively high
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but still manageable
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When we look at their cash flow
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it is pretty good
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They are generating positive and growing
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cash flow and free cash flow
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So, in terms of Alex Meter
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I will say that its financial is pretty good
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Lastly, let's look into the valuation of Tenable
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As of now, the current price to sales of Tenable
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is at 12.4x
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Assuming a 20% growth rate in their revenue
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their forward price to sales will be at about 10x
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I would say that at current price
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it's trading at a fair value
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Here is what I like and dislike about Tenable
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What I like is the company鈥檚 transition to recurring income
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and they鈥檙e a high margin business
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This is more sustainable and good for the long-term
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And the second thing I like is that
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Tenable is improving on their operating leverage
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This can be seen as the company
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is starting to generate free cash flow
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while their revenue grows
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As for what I dislike
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the management did not clearly show
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Q4 2020 dollar-based net expansion rate
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Is it because there鈥檚 something to hide?
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The dollar-based net expansion rate
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I mentioned earlier is based on Q3
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and not the latest figure
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After watching my analysis
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would you consider adding Tenable into your portfolio?
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Comment down below
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at least one thing you learned in this video
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Do like this video and share it with your friends and family
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Remember to subscribe to VI Channel
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and turn on the notification bell
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so you don鈥檛 miss out my future videos
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Till then, I鈥檓 Alex and goodbye
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