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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