Why Is Check Point Trading at a Premium to Analyst Estimates?


Apr. 17 2019, Updated 11:01 a.m. ET

Stock returns

Cybersecurity (HACK) leader Check Point (CHKP) has generated returns of 26% in the last 12 months. Since the start of 2019, the stock is up by 27%. The stock has gained 51% in the last three years and 93% in the last five years.

This growth was driven by the company’s rise in sales and earnings. Earnings per share rose at a compound annual growth rate of 12% in the last five years. Sales grew from $1.4 billion in 2013 to $1.9 billion in 2018 and are estimated to reach $2.2 billion by 2021. Check Point stock is currently trading 2% below its 52-week high of $132.76 and 39% above its 52-week low of $93.76. With an RSI (relative strength index) score of 66, Check Point stock is trading closer to overbought territory.

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Is CHKP stock overvalued?

Check Point’s forward 2019 PE ratio stands at 24.0x, and for 2020 it is 22.4x. Analysts expect CHKP’s sales to rise 4.1% in 2019 and 4.2% in 2020. Its EPS are expected to rise 6% in 2019 and by 7.3% in 2020.

Its EPS could grow at a compound annual growth rate of 7% over the next five years. The stock looks overvalued at current prices. The stock will still be overvalued even after losing 50% in market value.

Analysts’ recommendations

Of the 36 analysts covering Check Point, 13 have given it “buy” recommendations, 22 have given it “hold” recommendations, and one has given it a “sell” recommendation. The average 12-month target price for Check Point is $119, which indicates a potential downside of 8.5% from its current level.


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