Hook / Thesis
Tenable is quietly moving from the 'growth at all costs' phase toward durable profitability. The last several quarters show sequential revenue increases (Q1-Q4 FY2025 roughly $239M -> $247M -> $252M -> $260.5M) and improving operating cash flow. At the current share price near $20.69 (last trade), diluted shares in the latest quarter ~121.95 million imply a market cap of roughly $2.5 billion. If the Q4 earnings power proves repeatable, the stock is trading in the low-teens P/E on a run-rate basis - a compelling entry point for an active swing trade.
This is a trade idea, not a long-term gospel: buy a controlled position now with defined stops and targets. The setup is straightforward - Tenable has the enterprise recurring revenue profile you want in cybersecurity, improving margins, and a new AI/attack-surface expansion that could lift multiples if adoption accelerates.
What Tenable Does and Why the Market Should Care
Tenable is an exposure-management company built on vulnerability management (Nessus historically) that now sells a modular platform covering cloud security & compliance, AD management, OT security and advanced analytics. Customers buy this as ongoing subscriptions, which means high recurring revenue and visibility once installed. The exposure-management market is expanding with cloud migration and AI creating more attack surface to secure - Tenable is positioned to capture that incremental spend.
Why investors should care: recurring subscription economics + gross margins that support operating leverage. That combination can re-rate to higher multiples when revenue growth remains consistent and GAAP profitability or free cash generation becomes persistent.
What the recent results show - hard numbers
- Quarterly revenue run (FY2025 quarters): 01/01/2025-03/31/2025 revenue $239.137M; 04/01/2025-06/30/2025 revenue $247.295M; 07/01/2025-09/30/2025 revenue $252.440M; Q4 (reported 02/04/2026) revenue $260.530M. The four quarters sum to roughly $999.4M - roughly a $1.0B revenue run-rate.
- Margins: gross profit in Q3 was $195.687M on $252.44M in revenue - gross margin ~77.5%. High gross margins are characteristic of software/SaaS and support scalable profitability.
- Profitability trend: operating income in 07/01/2025-09/30/2025 (Q3) was positive at $7.136M and net income was $2.26M. Earlier quarters in FY2025 were negative (Q1 -$22.935M, Q2 -$14.706M) but Q4 delivered an EPS beat (EPS actual 0.48 vs est 0.422 on 02/04/2026), suggesting the company cleared the inflection to consistent profitability.
- Cash flow and balance sheet: operating cash flow continues to be healthy - 01/01/2025-03/31/2025 operating cash flow $87.407M; 04/01/2025-06/30/2025 $42.463M; 07/01/2025-09/30/2025 $53.85M. Total assets ~ $1.652B with equity attributable to parent ~$344.4M and noncurrent liabilities ~$587.9M. Current liabilities (~$720.3M) are sizable but matched by current assets (~$679.3M).
Valuation framing - why this looks like deep value
At the last trade price near $20.69 and diluted shares ~121.95M, implied market capitalization is approximately $2.5 billion. There are multiple ways to measure earnings power; Tenable's FY2025 quarterly EPS mix shows an inflection in Q4 (EPS actual 0.48 reported 02/04/2026). If you annualize the Q4 EPS (0.48 * 4 = $1.92) you get a run-rate EPS that implies a P/E in the high single-digits to low-teens (20.69 / 1.92 ≈ 10.8x). Using a more conservative smoothing that blends the four quarters gives a lower EPS run-rate and a higher P/E, but the key point is this: the market is currently assigning a modest multiple relative to the company's growth profile and recurring revenue mix.
Compare qualitatively: other pure-play and platform cybersecurity names often trade at significantly higher multiples when growth is in the high-teens/20s and margins are similar. Tenable's multiple appears attractive if the company sustains sequential revenue growth and margin expansion.
Trade Plan (Actionable)
- Trade direction: Long TENB.
- Entry: 20.00 - 22.00 (scale in if you can: 50% size near 21.0, add below 20.0).
- Stop: 17.50 hard stop (about -15% from 20.5 entry; tight enough to limit downside but wide enough for normal volatility).
- Targets:
- Target 1: $30.00 (≈ +45% from mid-entry) - tactical profit-taking zone if revenue/margins continue to re-rate.
- Target 2: $40.00 (≈ +95%) - stretch target if product adoption accelerates and market re-rates to SaaS/comps multiples.
- Time horizon: Swing trade, 3-9 months. Reassess at each quarter or major product update.
- Position sizing: Keep position to a size consistent with a medium-high risk trade (single-digit percent of equity portfolio) given execution and business risks.
Catalysts That Could Drive the Trade
- Continued sequential revenue beats and margin expansion across the next two quarters.
- Product adoption of the "AI attack surface" expansions announced 01/27/2026 - broader suites tend to lift net retention and upsell.
- Analyst upgrades and multiple expansion as GAAP profitability becomes stable and cash generation strengthens.
- Large enterprise deal announcements or strategic partnerships that prove cross-sell lift.
Risks and Counterarguments
Tenable is not a risk-free pick. Here are the primary risks and a balanced counterargument to the bullish thesis.
- Execution risk: Large portions of Tenable's revenue are subscription-based but still require sales execution and upsell. If retention or renewal rates slip, the revenue multiple compresses quickly.
- Earnings volatility: FY2025 showed uneven quarterly net income (Q1 and Q2 losses, small Q3 profit, Q4 spike). A single-quarter beat (Q4) can be noisy - investors should watch for follow-through rather than extrapolate from one strong quarter.
- Balance-sheet leverage and liabilities: Noncurrent liabilities are sizeable (~$588M) and current liabilities are large (~$720M). Interest expense has been a recurring line item in several quarters; macro rate moves or refinancing could pressure margins.
- Competition and pricing pressure: Exposure-management has many competitors and larger platform vendors that can bundle similar functionality. Pricing pressure or product displacement is a plain risk.
- Macro/demand risk: Enterprise security budgets can be lumpy; a pivot to cost-cutting could delay purchases or renewals.
Counterargument: The Q4 EPS beat could reflect timing or one-offs (tax items, one-time license recognition, or favorable expense timing). If those items are not repeatable and the underlying subscription growth slows, the run-rate P/E quickly looks less attractive. In short: the attractive valuation depends on durable improvement in revenue and margins, not a single-quarter spike.
What Would Change My Mind
- If Q1 or Q2 after this report shows revenue deceleration (sequential decline or materially below guidance) or material churn in enterprise customers, I would exit the trade.
- If Tenable reports persistent negative operating cash flow or sizable non-recurring charges that reduce free cash flow materially, the positive thesis would be weakened.
- Conversely, if Tenable posts a string of better-than-expected quarters with improving gross and operating margins and net retention north of historical levels, I would increase conviction and raise price targets.
Bottom line / Conclusion
Tenable offers an asymmetric short-to-medium-term trade: strong recurring revenue, high gross margins and improving profitability underpin a multiple that looks conservative on a Q4-run-rate basis. The market capitalization implied by the most recent trade price (~$2.5 billion) gives a margin of safety if the company can sustain growth and cash conversion. That said, earnings have been volatile and the balance sheet carries sizable liabilities; use a disciplined stop and scale in.
Trade action: buy between $20.00 and $22.00, stop at $17.50, take first profits near $30 and consider a larger target at $40 if the next two quarters deliver consistent beats and margin expansion.
Disclosure: This is a trade idea and not investment advice. Perform your own due diligence and size positions according to your risk tolerance.