Small-Cap Stock Down 34% to Buy on the Dip

Investors looking for undervalued stocks with significant growth potential may want to consider Tenable (TENB), a small-cap cybersecurity company that has pulled back 34% from its all-time high. Despite the decline, Tenable's fundamentals remain strong, and its valuation is relatively cheap compared to its peers. Here's why investors might want to buy the dip.

Tenable's vulnerability management platform is the most accurate and widely deployed in the industry, with over 2 million downloads. Its cloud platform features AI Security Posture Management (AI-SPM), which helps businesses secure their data and identify vulnerabilities in popular cloud-based AI development platforms. Tenable's revenue growth decelerated in 2024, but its profitability improved significantly, with a 63% jump in non-GAAP net income compared to 2023.



Tenable's current valuation is 5.3 times its sales, which is significantly cheaper than many of its peers in the cybersecurity industry, including CrowdStrike, Palo Alto Networks, and Zscaler. These companies have P/S ratios of 11.5, 10.2, and 10.1, respectively, and have reported revenue growth of 29%, 26%, and 14% in their most recently reported quarters. While Tenable's revenue growth has decelerated to 13% in 2024, its profitability has improved significantly, suggesting that the 34% decline in Tenable's stock price may be an overreaction.



Tenable faces competition in the vulnerability management segment of the cybersecurity industry, and its success depends on the growth of cloud computing and AI, which are industry tailwinds. However, the company's strong business fundamentals, scalable operations, and clear path for growth make it an attractive investment opportunity. Investors who can tolerate higher risk levels and maintain a long-term perspective may want to consider Tenable as a potential addition to their portfolios.

In conclusion, Tenable's strong fundamentals, relatively cheap valuation, and significant growth potential make it an attractive small-cap stock to consider buying on the dip. While the company faces competition and industry tailwinds, its strong business fundamentals and scalable operations position it well for long-term success. Investors should continue to monitor the company's performance and valuation to ensure that the decline is not a sign of underlying issues.