N-able, Inc.: A Hidden Gem Set to Shine with Russell 3000E Inclusion

N-able, Inc. (NYSE:NABL) is poised to capture investor attention as it prepares for inclusion in the Russell 3000E Value Index on June 30, 2025. This milestone, combined with its improved financial health, strategic product launches, and recent earnings surprises, positions the company as an undervalued growth opportunity. Here's why investors should take notice.

A Strong Financial Turnaround

N-able has made significant strides in reducing its financial risk. Its debt-to-equity ratio dropped to 0.43 in Q1 2025, a company low, reflecting disciplined debt management and growing equity. This improvement—down from 0.44 in Q4 2024 and 0.55 in 2021—signals stronger balance sheet health. While the ratio remains slightly above the Technology sector median of 0.35, it now ranks 23rd in its industry for the lowest debt burden, a stark contrast to its 2021 position. This reduction in leverage reduces refinancing risks and frees capital for strategic growth.

Strategic Initiatives Drive Growth

The company has bolstered its product portfolio with launches that address critical market needs. Notably:
1. Adlumin Breach Prevention for Microsoft 365: Enhances cloud security by tackling credential theft and account takeovers, a priority for businesses.
2. Vulnerability Management for N-central/N-sight: A forthcoming feature enabling proactive identification and remediation of cybersecurity risks across operating systems.
3. 2025 State of the SOC Report: Positions N-able as a thought leader in cybersecurity, attracting enterprise clients seeking advanced threat monitoring solutions.

These initiatives align with the rising demand for cyber-resilience tools, a sector projected to grow at 9% CAGR through 2028. N-able's focus on integrating security into its IT management platform gives it a competitive edge.

Earnings Surprises Signal Strong Execution

N-able's Q1 2025 results far exceeded internal guidance:
- Revenue hit $118.2 million, up 3.9% YoY (5.7% on a constant currency basis).
- Subscription revenue rose 4.8% YoY, while ARR jumped 10.3% to $492.7 million, underscoring sticky customer relationships.
- Adjusted EBITDA reached $31.6 million, with a 26.8% margin, outperforming expectations.

The company also raised its full-year revenue guidance midpoint to $494.5 million, a 0.9% increase from prior projections. This confidence stems from strong bookings, including its “largest new deal ever” in Q1.

The Russell 3000E Inclusion Catalyst

N-able's inclusion in the Russell 3000E Value Index on June 30 will likely trigger index fund buying, as passive investors must mirror the index's composition. Historically, such additions have led to short-term price pops (e.g., 10–20% spikes in small-cap stocks). However, N-able's fundamentals justify a sustained upward trajectory.

Risks and Considerations

• Macroeconomic headwinds: Currency fluctuations and IT spending cuts could pressure revenue.
• Debt obligations: While reduced, net debt remains at $332.6 million, requiring careful management.
• Competitive landscape: Larger players like Palo Alto Networks or CrowdStrike may poach market share.

Investment Thesis

N-able is a buy at current levels, with a compelling entry point ahead of its Russell inclusion. Key positives:
1. Undervalued valuation: Trailing P/E of 15x versus sector peers at 20–25x.
2. Upside from index inflows: Passive demand could boost liquidity and valuation multiples.
3. Strong product pipeline: New features like Vulnerability Management will drive ARR growth.

Price Target: With ARR growth of 8–9% in 2025 and a conservative P/ARR multiple of 3.5x, NABL could hit $1.8 billion valuation, implying a 25% upside from current prices.

Conclusion

N-able's financial discipline, product innovation, and earnings momentum make it a standout in the cybersecurity-software space. The Russell 3000E inclusion is a catalyst, but the real value lies in its ability to capitalize on rising IT security spend. Investors seeking growth with a margin of safety should consider a position ahead of June 30.

Risk Rating: Moderate (BBB)
Hold Period: 6–12 months