Investigative analytics software firm Cognyte Software (CGNT) has seen an uptick in its business momentum, according to its recent Q3 Fiscal 2025 report, which beat top-and-bottom-line expectations. This improvement has been fueled by significant deal wins, such as the recent $20 million agreement with a long-term national security client in the EMEA region. This financial success has prompted management to upgrade the full-year outlook for FYE25.
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The stock is up over 30% in the past three months and shows ongoing positive momentum. Despite the run-up, it remains relatively attractively valued, making it a reasonable choice for value-oriented investors seeking exposure to the Information Technology sector.
Cognyte Ushers in a Brave New World for Analytic Software
Cognyte Software is an investigative analytics software company that provides numerous organizations with crucial intelligence for maintaining safety. Its open-interface software is engineered to enhance investigation speeds and effectiveness. Hundreds of organizations rely on the software to expedite investigation processes and yield insights that aid in identifying and neutralizing threats to national security and handling various criminal and terror activities.
The company’s AI features offer crucial insights into illicit activities, including terrorism, drug trafficking, and weapons smuggling, enabling agencies to take action before events occur. This data-driven solution seeks to improve strategic planning and resource allocation tailored to individual threats.
Cognyte has announced a deal worth over $20 million with a long-term national security client in the Europe-Middle East-Africa region. The agreement aims to enhance the agency’s capacity with high-end AI capacities, facilitating faster investigations and proactively addressing potential threats.
Robust Financial Results Drive Elevated Outlook
The company reported strong financial results for Q3 FYE25. Revenue reached $89.0 million, showing year-over-year growth of 12.1% while beating analysts’ expectations. Non-GAAP operating income increased to $3.4 million from $1.2 million in the same period last year. In comparison, the GAAP operating loss stood at $2.2 million, an improvement from a loss of $2.8 million recorded in Q3 FYE24.
Despite the GAAP net loss of $2.6 million compared to the net income of $6.2 million in the same period last year, the company shows impressive progress. Its adjusted EBITDA increased by 41.9% to $6.6 million, and the non-GAAP EPS of $0.02 missed consensus projections by $0.08.
As of the quarter’s end, the company’s cash equivalents and short-term investments stood at $107.3 million.
Following its strong third quarter, CGNT’s management has elevated the full-year outlook following an impressive year-to-date performance and anticipated continued demand. For the fiscal year ending January 31, 2025, the company expects revenue of $349 million (+/—1%), reflecting an approximate 11% increase from last year. Additionally, the midpoint revenue outlook for Adjusted EBITDA stands at approximately $26 million, while the non-GAAP diluted EPS is expected to be $0.05.
Positive Momentum and Value
The stock has been range-bound for much of the past year, finally breaking out in early November. It trades near the high end of its 52-week price range of $5.44 – $9.12 and demonstrates ongoing positive price momentum as it trades above major moving averages. The stock looks undervalued, with a P/S ratio of 1.9x compared to the Information Technology sector average of 3.3x.
Wall Street follows the stock thinly, but a few recent analyst ratings have struck a cautious tone. Based on those, Cognyte Software is rated a Hold overall, with an average price target for CGNT stock of $7.50. This represents a potential downside of -14.29% from current levels.
Closing Thoughts on CGNT
Reporting a successful Q3, Cognyte Software has displayed positive business momentum with significant wins. This performance, coupled with a stock upswing of over 30% in the last three months, has led management to upgrade the company’s fiscal outlook for the year-end. Despite the recent run-up in share price, the stock’s current valuation suggests it could still offer an attractive entry point for value-oriented investors seeking exposure to the thriving Information Technology sector.
