4 Significant Points To Buy Check Point Shares

Today we are analyzing the investment attractiveness of Check Point Software Technologies originally from Israel, whose CHKP stocks are traded on the Nasdaq exchange. The company develops, markets and supports a range of products and services for information technology security. And unlike the previous hero of Airbus, Check Point can be classified as an outstanding company with a fair valuation. Just like last time, we will ask complex questions and get two simple answers:
1) is the company good enough for investment
2) is it priced fair
No fluff or empty chatter — only facts and objective, unbiased financial analysis.

Introduction

As we said, Check Point works in the field of information security. This is a difficult topic to explain to uninformed people, but it seems that many of us have heard the words «firewall«, «VPN (virtual private network)» and «antivirus» and understand what it is.

CHKP`s annual revenue (for the last 12 months based on the results of 1Q2024) is $2.44B and consists of:
-security subscriptions (40.6%)
-software updates and maintenance (38.8%)
-products and licensing (20.6%)

CHKP`s revenue breakdown:
-Europe and the Middle East (46.2%)
-Americas (42.5%)
-Asian region (11.3%)

Are CHKP shares viable investments?

To answer this question, we must find out whether the company’s business is outstanding or ordinary? Of course, we base our conclusion on financial performance, and to ensure an unbiased opinion, we use the Eyestock Rating as an integrated metric based on 10 different parameters.

Check Point`s Eyestock Rating of 123% confirms the company’s high quality. Remember that once the rating reaches 100% or more, we call such a company outstanding and the investment viable. Moreover, since the beginning of monitoring this company (2015), the rating has never fallen below the threshold mark. Check Point has a balanced rating structure, where the stability score is slightly inferior to the others, but still quite high.

Let’s note the strongest points for buying Check Point stocks:
—Net Profit Margin is significant 34%. It indicates the presence of a competitive advantage of the company.
—Earnings Quality is higher than 100%, which indicates the absence of manipulation of financial results and reporting
-Check Point has no debt. It demonstrates the foresight of management and the high solvency.
—ROE is 28%, and it is 6 times higher than the current risk-free rate.

Result: from the financial analysis point of view, Check Point Software Technologies has no obvious weaknesses and is regarded by us as a viable investment.

Is CHKP priced fairly?

No. But CHKP’s current price is trading very close to fair value. Let’s clarify what we mean by fair value. Our valuation process emphasizes the use of historical Price-to-Earnings (P/E) values. The P/E ratio, a key metric comparing a company’s market price per share to its earnings per share (EPS), is central to our analysis. By evaluating historical P/E ratios, we place a company’s current financial metrics within a broader historical context.

So, we use the median P/E multiplied by current earnings per share as the fair price. The median P/E value for CHKP is 19.75, and the annual EPS is $7.19, which means that Check Point`s fair historical valuation equals $142 per share. That`s 6% below the closing price of May 16.

Also, by studying the historical valuation of the company, we calculate the maximum and minimum value. Just pay attention to how the share price has behaved over the last 5 years and how it interacts with Eyestock’s value levels. Doesn’t this make things easier for us?
Therefore, we are waiting for $142 to buy and $132 to increase the holding. And $160 could be a good target.

The potential of this investment is not so high. In general, CHKP is exactly the stock where the entry point needs to be selected, despite the excellent financial performance of business indicators. It’s all about the earnings growth rate. Over 2 years the average value is +11%, and over 5 years only +7%. This is not very much for a modern IT company. And this determines the average annual return of shares of +4.1% (at the same time the company does not pay dividends). But the company is one of the most stable we have ever seen during our analysis. Just wait for the right price and make one good trade.

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