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 (NASDAQ: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 (NASDAQ:CHKP) develops, markets, and supports a range of software, and combined hardware and software products and services for information technology (NYSE: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).
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CHKP over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.