Why Check Point Software Technologies Can ImproveCHKP) has remained flat on the stock exchange in 2015 even though the company has been reporting robust growth in recent quarters. But, I think that Check Point can pick up pace in the long run on the back of the improving adoption of its data center products and super high-end management appliances. Let’s take a look at the reasons why Check Point can do well going forward.
Making the right moves
Check Point has seen strong subscription growth on the back of healthy demand for the company’s superior and innovative technologies that include Threat Detection and Threat Removal which prevent complex cyber-attacks.
For instance, Check Point grew its operating cash flows for second quarter of 2015 to $193 million compared to $168 million during the same period last year, strengthening its balance sheet and encouraging the company to make future growth investments while delivering notable shareholder returns.
Going forward, Check Point is believed to grow strongly, driven by a solid demand for the company’s technologically-advanced security solutions given an accelerated increase in cyber attacks. Further, Check Point is increasingly committed towards maintaining strong cash position, crucial to support its prospective growth investments and offer improved shareholder returns.
Impressive valuation and share repurchase
The forecasted P/E and earnings growth rates of Check Point are positive, with the company expected to optimize its operations and bring down the P/E ratio to 19.84 in 2016 from 21.84 during 2015. In addition, analysts analyzing this company estimate it to expand its earnings at an average annual rate of about 10% over the next five years. For the current year, analysts are estimating earnings growth of 6.49% as compared to the previous year and they forecast earnings expansion for next year of 10.06% compared to the current year’s estimated earnings.
In the second quarter of 2015, Check Point strategically executed a share buyback program and thus, repurchased 2.9 million shares for a net price $245 million as against just $194 million of share repurchase program executed during the second quarter of 2014, reflecting the continued commitment of technology major towards delivering superior shareholder returns.
The continuously strengthening balance sheet of Check Point which is partially driven by the company’s ongoing cost-optimization initiatives is basically encouraging Check Point to deliver improved shareholder return through planned share repurchase program.
Moves to expand the business
Check Point recently acquired Lacoon Mobile Security that enhances its portfolio of mobile security offerings through the addition of real-time anomaly detection, behavioral risk analysis and sophisticated mobile application threat detection capabilities.
The cyber security major recently declared the 1200R security gateway application which is an advancement of Check Point’s key solutions for Industrial Control Systems (ICS) and core infrastructure. The robust security gateway application is designed for implementation in far-flung areas and tough environments.
The strategic acquisition of Lacoon Mobile Security is forecasted to significantly expand Check Point’s portfolio of mobile security solutions and thus increasingly attract new enterprise customers in quest of innovative mobile security solutions.
Check Point and FireEye lately declared a key technology partnership to share threat intelligence for protecting mutual customers from contemporary technologically superior attacks.
Moreover, Check Point has achieved the top-slot in global consolidated firewall and UTM appliance market. It is expected to be having a leading market share in international firewall equipment market coupled with being a leader in the Gartner Magic Quadrant for Enterprise Network Firewall.
The cyber security provider is expected to be focused on expanding its threat intelligence through planned new acquisitions in this space. Further, Check Point’s unrivalled position in global security market is verified by several accolades received by the company in this context.
Hence, from different perspectives, Check Point looks like a stock to hold for the long run. The company is investing in new solutions, and this will allow it to improve its financials going forward. Thus, I think that investors should not be discouraged by Check Point’s disappointing stock market performance as the company can get better in the long run.
Published on Oct 7, 2015By Yaggyaseni Mittra