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Check Point Software: Should You Buy The Dip?

Jurijs Sibikins profile picture
Jurijs Sibikins


  • Check Point has recently reported fairly good earnings results for 2017.
  • The buyback program along with the growth of retained earnings will make sure that Check Point’s business stays afloat.
  • I believe that Check Point shares are trading around their fair value and do not recommend acquiring them at the current price.

Let's start with analyzing Check Point's (NASDAQ:CHKP) annual reports provided by the company over the recent years. Over the past year, revenue grew to 7% YOY amounting to $1,855 million. The active demand for the company's products designed for small and medium-sized businesses as well as increased revenues from subscription served as the growth drivers. According to GAAP, the net profit in 2017 grew by 6.5% YOY amounting to $803 million. Earnings per diluted share increased by 15% amounting to $4.82. Check Point's management also provided projections for the entire year 2018. The company expects the annual adjusted profit of $5.50-5.90 per share at the revenue of $1.9-2.0 billion.

If you look at the long-term indicators, you'll notice that the company is developing: its revenue increases steadily, its net income grows each year, while its operating margin remains stable and the highest in the industry.

(source: company reports)

In addition, there is a positive trend related to the retained earnings indicator. In recent years, both cash and cash equivalents of the company have remained stable and retained earnings have been steadily growing. The growth of retained earnings increases the financial stability of the company, revealing the source for its further development.

(source: company reports)

Sustainable financial performance allows the company to reward its investors through the buyback program. As you can see in the graph, the amount the company spends on these programs almost equals the operational cash flow. As you know, shares buyback program reduces the number of existing shares, increasing earnings per share (EPS) of a company.

Last year, Check Point approved the new buyback program, under which the company will spend $250 million per quarter over the next four quarters to repurchase its own shares. It means that the company wants to demonstrate its investors that its shares are undervalued, and it

This article was written by

Jurijs Sibikins profile picture
I'm a beginner in the field of financial analysis and I use different popular valuation techniques, such as calculating discounted cash flow to find out the fair value of the targeted company. I look for growth in the different US market sectors and invest in the businesses that are driven by the trends of the future. I hold BA in Economics from the Stockholm School of Economics in Riga.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within 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.

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Comments (1)

Charlie's Munger profile picture
I have a starter position in CHKP, will buy more lower. Forever stock?
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