Varonis Systems walked into this earnings season on a strong run, with the stock up sharply over the past three months. That momentum snapped hard. Shares fell 9% to US$40.65 in the first full session after results, even though the headline was not about a demand problem.

The real story is the margin picture. Varonis reported US$180.0m in revenue with a non GAAP gross margin of 77.7% and only a thin non GAAP operating income of US$3.7m. For a high price to sales cyber security stock, that squeeze is what investors are reacting to.

Is Varonis Systems trading at a rare discount, or is this simply an expensive stock with thin profits and premium sales multiples? Compare that 6.8x P/S and the discounted cash flow estimate inside our