1 Small-Cap Growth Stock Down 49% You Might Want to Buy on the Dip

Cybercrime is a multi-trillion dollar problem that by some estimates has more than tripled in scope in the past 10 years. Therefore, cybersecurity spending is one thing most businesses can't afford to cut back, even amid the growing economic and political uncertainty triggered by President Trump's tariffs.

Tenable (NASDAQ: TENB) is a leader in vulnerability management, which is a proactive form of cybersecurity designed to help businesses patch weaknesses in their networks before they can be exploited. The company is using its success in this area to expand its product portfolio, which is proving to be a highly effective strategy.

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Tenable stock is down 49% from its all-time high because it hasn't grown quite as fast as some of its peers. However, it has a market capitalization of just $3.7 billion as of this writing, and it's one of the cheapest stocks in the entire cybersecurity industry, so here's why there's significant potential for upside.

Image source: Getty Images.

An expanding portfolio of cybersecurity products

Tenable is home to the Nessus platform, which is the cybersecurity industry's most deployed vulnerability assessment solution. It proactively scans networks, operating systems, and devices for weak spots so they can be fixed before bad actors discover them. It protects against over 99,000 common vulnerabilities and exposures, which is the most of any competing tool, and it's also the most accurate with the lowest rate of false positives.

But Nessus has become an on-ramp for a much broader set of products for Tenable, which protect cloud networks, critical assets, and employee identities. The company's Tenable One platform, which was launched in 2022, brings many of those products together to create an all-in-one exposure management solution for enterprises.

Tenable One leans on artificial intelligence (AI) to identify vulnerabilities and even recommend solutions. Cybersecurity managers can prompt the platform's ExposureAI virtual assistant with questions, like how exposed specific assets might be, or which employees have access to those assets so the organization knows where the risks lie.

Tenable's first-quarter results exceeded expectations

Tenable generated $239.1 million in revenue during the first quarter of 2025. It represented a fairly modest increase of 11% compared to the year-ago period, but the result was much better than management's forecast of $233 million.

The company also beat expectations at the bottom line. It anticipated $0.29 in non-GAAP (adjusted) earnings per share during the quarter, but the number came in at $0.36 instead. It represented growth of 44% compared to the same quarter last year, which reflects management's continued focus on profitability.

To be clear, Tenable still lost $22.9 million on a generally accepted accounting principles (GAAP) basis during the quarter, but that figure included $55.9 million in stock-based compensation, which is a non-cash expense, and $4.6 million in one-off acquisition related costs. In other words, the non-GAAP result is a better reflection of the cash Tenable's business is generating, which is why it's the company's preferred metric.

But it wasn't all good news in the first quarter. Management issued cautious guidance for the full year, revising its revenue estimate down slightly from $976 million to $975 million, and reducing its non-GAAP earnings-per-share estimate from $1.56 to $1.48 (at the midpoints of the forecast ranges).

Although cybersecurity software isn't subject to any of the recently imposed tariffs, trade tensions could still drive an economic slowdown, which would shrink the pool of new potential customers for Tenable. In fact, on his conference call with investors for the first quarter, CEO Steve Vintz said "recent U.S. policy actions have the potential to reduce visibility in our enterprise business, which could lessen sales cycles."

Tenable is cheap relative to other cybersecurity stocks

As I mentioned at the top, businesses are unlikely to compromise on cybersecurity because the financial and reputational costs of a breach are simply far too high. In my opinion, even a drop in new customer activity due to an economic slowdown is likely to be temporary, especially since several countries have already come to the table to negotiate trade deals with the Trump administration. Therefore, this industry could be a great place to invest right now.

Based on Tenable's trailing-12-month revenue, its stock is trading at a price-to-sales (P/S) ratio of just 4 as of this writing, which makes it substantially cheaper than a basket of its peers in the cybersecurity space:

PS Ratio data by YCharts

A higher P/S ratio typically correlates with faster revenue growth, and Tenable simply isn't growing as quickly as some of its peers in the industry. Its 11% revenue increase in the recent quarter paled in comparison to CrowdStrike's revenue growth of 25%, for example, which is why its stock has underperformed.

Many enterprise customers are looking for simple all-in-one cybersecurity solutions and the Tenable One platform is still relatively new compared to the likes of CrowdStrike's Falcon platform. However, Tenable is coming off the biggest quarter ever for seven-figure customer wins (customers spending $1 million or more per year), and management says Tenable One was the catalyst for that success. The company also plans to launch a new, more expensive version of Tenable One with more features in the current quarter, which could add to its momentum.

Based on Tenable's current revenue, it has barely scratched the surface of its estimated $33 billion addressable market. Tenable One might be the key to higher market penetration because it attracts higher-spending customers, so this could be a great time to buy Tenable stock ahead of a new potential growth phase for the company.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Zscaler. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.