Is It Time to Load Up On Beaten-Down SentinelOne Stock?

SentinelOne (NYSE: S) shares are down more than 20% over the past year, despite the stock being both cheap and seeing strong revenue growth. Let's take a closer look at the cybersecurity stock's recent quarterly results to see if now is a good time to load up on shares.

Strong revenue growth continues

SentinelOne continues to deliver strong revenue growth, with its sales jumping 20% in its fiscal fourth quarter to $271.2 million. That came in just ahead of its earlier $271 million forecast.

Annual recurring revenue (ARR), which is the annualized value of its customer subscription and consumption-based contracts, rose by 21% to $1.119 billion. It added record new net ARR of $64 million in the quarter. Meanwhile, the number of customers with ARR of $100,000 or more climbed by 18% to 1,667.

Notably, the company is seeing strong cross-platform adoption, with 65% of enterprise customers now using three or more of its solutions compared to just 39% a year earlier. Its Purple AI solution had a record 50% attach rate for licenses sold in Q4. It also highlighted a big seven-figure win with Cloudflare, replacing a competitor, and signed a large deal with a Fortune 100 financial services company for AI security and governance.

Adjusted earnings per share (EPS) rose by 75% from $0.03 to $0.07 and came in above the analyst expectations of $0.06. The company generated $76.6 million in operating cash flow for the year and free cash flow of $75.9 million. It ended the quarter with about $769.6 billion in net cash and short- and long-term investments and no debt.

Turning to guidance, the company projected fiscal Q1 revenue of between $276 million and $278 million, which would equate to around 21% growth. It expects adjusted EPS to be between $0.01 and $0.02. For the full year, it forecasted revenue to range between $1.195 billion and $1.205 billion, representing 20% growth. It projected adjusted EPS of $0.32 to $0.38.

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Is it time to buy SentinelOne shares?

SentinelOne is growing its revenue at a similar low 20% rate as endpoint security peers CrowdStrike and Palo Alto Networks, but trades at a fraction of their valuations, with a forward price-to-sales (P/S) multiple of about 4 times analysts' estimates versus 19 for CrowdStrike and 12 for Palo Alto. That's a big disconnect and a gap that should close over time if the company can continue to grow its revenue at a similar pace and start to see more operating leverage.

Its recent acquisitions of Prompt Security, which has been seeing strong momentum, and Obervo AI, meanwhile, helped the company move beyond just endpoint security into broader security operations and data management. This should help it compete better against competitors and drive future growth. With a cheap valuation, the stock is a buy.

Geoffrey Seiler has positions in SentinelOne. The Motley Fool has positions in and recommends Cloudflare, CrowdStrike, and SentinelOne. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.