In doing my usual research over the weekend I came across a couple of interesting software stocks. Both have cash rich balance sheets, reasonable valuations and both look like they are bottoming after significant sell offs.
"Keynote Systems (KEYN) provides Internet and mobile cloud monitoring and testing solutions worldwide. The company's Internet cloud products and services including web monitoring and performance offerings." (Business description from Yahoo Finance)
4 reasons KEYN is undervalued at under $15 a share:
- The company has over $45mm in net cash on the books (over 15% of current market capitalization).
- Insiders and beneficial owners have snapped up over $9mm in new purchases over the prior six months.
- The stock is selling near the bottom of its five year valuation range based on P/B, P/S and P/CF. The company has grown revenues at a 9% annual clip over the last five years. Keynote is on track for 20% sales growth this fiscal year.
- The median price target on KEYN is $19 a share. The stock was trading at $20 earlier in the year and looks like it has put in a bottom. It also recently crossed its 100 day moving average (See Chart).
"Check Point Software Technologies (CHKP) develops, markets, and supports a range of software, and combined hardware and software products and services for information technology (IT) security worldwide." (Business description from Yahoo Finance)
4 reasons is a bargain at $46 a share:
- The company has over $1.3B in net cash on its books (around 15% of its market capitalization).
- The median analyst price target of the 22 analysts that cover the stock is $61.50 a share. Credit Suisse has an "outperform" rating and a $67.50 price target on Checkpoint.
- The stock is selling in the bottom half of its five year valuation range based on P/E, P/B, P/CF and P/S. The company has grown revenues at better than 14% annually on average over the past five years. Earnings per share went up at a 20% annual clip during that time span as well.
- CHKP looks like it is trying to put in a bottom here after falling some 30% since the second quarter (See Chart).