Cognyte Software Ltd: Contrarian Cybersecurity Play Has Strong Upside

Strong Tailwinds to Drive Long-Term Growth for Cognyte Stock

Given the continued cyberattacks on governments and companies around the world, there’s a bullish case for stocks of companies that provide innovative cybersecurity solutions.

The tailwinds for the cybersecurity sector are enormous. It’s estimated that the global security analytics market will jump to $18.1 billion in 2024, compared to $7.8 billion in 2019. (Source: “Security Analytics Market by Application,” MarketsandMarkets, last accessed September 30, 2021.)

As such, investors might want to consider Israel-based Cognyte Software Ltd (NASDAQ:CGNT). The company provides security analytics software to thousands of government and enterprise clients in more than 100 countries.

CGNT Stock’s Price Weakness Presents an Opportunity

After trading at a high of $38.00 on February 1—after being spun off from Verint Systems Inc. (NASDAQ:VRNT)—Cognyte stock steadily declined to a low of $19.88 on September 28.


CGNT stock has been struggling to find support, and it recently breached its 50-day moving average. The subsequent selling of shares of Cognyte Software Ltd has been extreme after breaking key support at $23.00.

Cognyte stock needs to see a rebound in relative strength from the current oversold condition. I view the price weakness as an aggressive opportunity.

Chart courtesy of

Cognyte Software Ltds Revenues & Profits Expected to Accelerate

Cognyte Software Ltd’s three years of reported financials show muted results, but with the separation from Verint Systems, we could see Cognyte deliver improved results as the company focuses on its core strategy.

 Fiscal YearRevenues (Millions)Growth

(Source: “Cognyte Software Ltd.” MarketWatch, last accessed September 30, 2021.)

Cognyte is expected to produce revenues of $489.9 million in fiscal 2022 (ending January 31), followed by 10.9% to $543.5 million in fiscal 2023. (Source: “Cognyte Software Ltd. (CGNT),” Yahoo! Finance, last accessed September 30, 2021.)

Cognyte trades at a relatively attractive 2.4 times its 2022 revenue estimate.

While Cognyte Software Ltd’s revenues have been flat, the company managed to generate earnings before interest, taxes, depreciation, and amortization (EBITDA) income in all three reported years.

Fiscal YearEBITDA (Millions)Growth

(Source: MarketWatch, op. cit.)

Cognyte also reported generally accepted accounting principles (GAAP) earnings-per-share (EPS) profits in all three years.

Fiscal YearGAAP Diluted EPSGrowth

(Source: MarketWatch, op. cit.)

Adjusting for non-recurring expenses, Cognyte Software Ltd reported profits of $1.03 per diluted share in fiscal 2021.

At this time, the company is expected to report a lower adjusted $0.81 per diluted share in fiscal 2022, but the results could surprise. For fiscal 2023, Cognyte is expected to rebound with earnings of $0.95 per diluted share. (Source: Yahoo! Finance, op. cit.)

The decline in the share price of CGNT stock helps justify a more reasonable forward multiple.

Cognyte Software Ltd reported positive free cash flow in all three years, including a record $57.1 million in fiscal 2021.

Fiscal YearFree Cash Flow (Millions)Growth

(Source: MarketWatch, op. cit.)

A look at the company’s balance sheet shows a solid cash level of $68.3 million and manageable debt of $20.7 million. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Cognyte Software Ltd needs to deliver steady financial growth to attract investors and justify a higher earnings multiple.

That said, institutional investors already love Cognyte stock. About 238 institutions hold an 88% stake in the outstanding shares. (Source: Yahoo! Finance, op. cit.)

My view is that investors could pick up shares of CGNT stock on the price weakness and wait for better financial results to drive a rally.