This is another in a series of articles about Israel-based
companies that appear to be a potential investment opportunity. People ask me
my opinion when I speak to community and business groups how they can best help
Israel and participate in the growth of the startup nation? Always consult your
broker, lawyer, and accountant before making investments. Read the full article
https://www.gurufocus.com/news/1836221/check-point-software-the-future-of-cybersecurity
Disclaimer: Please be advised that
neither the author or Life in Israel, its affiliates, its employees or agents
accept liability for any errors, omissions or damages caused by this
communication or its attachments, or which may otherwise arise as a result of
this communication transmission. Dr. Harold Goldmeier, Business Teacher
and Consultant
Summary
- Check Point
produces excellent margins and is a profitable stalwart in the
fast-growing cybersecurity industry.
- Its market
cap is up to over $16 billion through organic sales growth rather than
M&As.
- The company
finished the last quarter holding $3.8 billion in cash and equivalents.
- I predict a
double-digit increase in the share price given the company's long-term
potential.
Among
the more established leaders in the fast-growing cybersecurity industry is the
Israeli-American Check Point Software Technologies Ltd (CHKP, Financial).
Check Point has impressive margins, and I believe its conservatively managed
balance sheet, in combination with its leading cybersecurity technologies and
established market present, could help propel the company and its shares even
faster than the overall industry in the coming years.
Market
growth
Cybersecurity
is the future of defense. Governments, businesses, medicine, transportation and
every other computerized service will not survive the migration to the cloud
without sufficient data protection. Fortune Business Insights claims the global
cybersecurity market is on track for a CAGR of 13.4% to surpass $376 billion by
2029.
Company
profile
Check
Point’s business plan is neat and to the point; it develops, markets and
supports network, endpoint and data cybersecurity software. Services include
management and organization assessments, solutions and training. Its primary
target sectors are 50% software and 38% internet software services.
Management
tends to be conservative in its approach to business. For instance, Check Point
has acquired just one company in the last five years, Avanan, in August 2021).
It has made a total of 17 acquisitions since its 1993 founding.
Check
Point would be able to aggressively pursue M&As if it so wished. In my
opinion, management is too conservative in this torpid period of inflation and
lower valuations.
Valuation
As
of this writing, Check Point's market cap is $16.36 billion. Short interest is
less than 2%. Shares sell for $124.06 apiece; this is about the midpoint
between that stock’s 52-week high of $149.62 and low of $107.85. The share
price has recently moved in concert with the stock market and tech stock
trends. It might climb to $140 per share range if interest peaks and the tech
market trembles abate?
Check
Point reported strong first-quarter results in April 2022. Revenue grew 7% year
over year, substantially beating the consensus estimate. Products and licenses
grew 6%, and security subscriptions were up 13.6% year over year. Quantum,
CloudGuard and Harmony products were best sellers in the first quarter.
The company finished
last quarter holding $3.8 billion in cash and equivalent. Its gross profit
margin is 87.67%. The net income margin is 36.43%. Check Point’s margins are
among the highest in the cybersecurity industry, and it is profitable. I am moderately bullish on Check Point, primarily
because the tech industry is volatile and Check Point has both an powerful
product lineup and a solid balance sheet.
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