This technology security company’s EPS estimates for 2017 were just revised upward by 12 analysts.
Check Point Software Technologies Ltd. (CHKP)
From Argus Weekly Staff Report
We are maintaining our BUY rating on Check Point Software Technologies Ltd. (NGS: CHKP) to a target price of $115. We see Check Point as one of the few players in internet security with both the technology and the management stability needed to take advantage of an increasingly toxic malware threat environment. We believe that Checkpoint has begun to benefit from its investments in sales force expansion and new product development over the last several years.
We also believe that Check Point’s focus on advanced threat protection and mobile services addresses the needs of most companies, not just for the perimeter defense of IT networks but also for the detection and neutralization of advanced threats, including ‘zero-day’ attacks and the emerging threat of ‘ransomware.’
The company’s software blade products continue to drive results, with another quarter of strong double-digit revenue growth in 1Q17, while other segments posted low-single-digit growth. Checkpoint has been accelerating investment in new technologies through tuck-in acquisitions while also expanding its sales and sales support staff. The company introduced a host of new products, applications, and updates at its User Conference on April 27. While margins have narrowed as a result, they remain relatively strong.
Checkpoint provided 13% EPS growth off 8% revenue growth in 1Q17. Our 2017 estimate remains at the high end of the company’s guidance range of $5.05-$5.25. Our long-term growth rate is 10%.
CHKP shares are trading at the high end of their 52-week range of $74-$106. The shares have risen 27% in the last year, about in line with the return for the Nasdaq. Checkpoint’s enterprise value to trailing 12-month EBITDA multiple of 15.4 is near the peer median. The forward enterprise value/EBITDA multiple of 13 is 11% above the peer average, compared to an average premium of 2% over the past two years. As Checkpoint is a market leader, we believe it deserves to trade at a premium.
Jim Kelleher, CFA, Argus Weekly Staff Report, www.argusresearch.com, 212-425-7500, May 12, 2017