Check Point (CHKP) is one of the top players in the cybersecurity space. The growing number of cyber attacks have provided an opportunity for Check Point and peers to expand their product portfolio and services. Check Point accounts for 9.5% of the Worldwide Security Appliance market. Other major players include Cisco (CSCO), Palo Alto Networks (PANW), Fortinet (FTNT), and Symantec (SYMC) with market shares of 14.1%, 12.8%, 9.9%, and 4.2%, respectively.
Check Point (CHKP) stock has lost 5.2% since the start of April 2019 and is down 1% this month as well. The stock fell over 8% on April 18 after providing tepid guidance for 2019. Check Point estimates sales between $474 million and $500 million and EPS between $1.32 and $1.40 in the second quarter.
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The midpoint guidance indicates sales of $487 million and EPS of $1.36. In comparison, Wall Street estimates the company to post EPS of $1.38 in the second quarter. Sales and earnings growth have driven Check Point’s stock higher over the last few years. The stock has risen at a CAGR (compound annual growth rate) of 13.4% in the last three years and 13% in the last five years.
Check Point’s EPS rose at a CAGR of 11.5%, while revenue rose at a CAGR of 6.6% in the last five years. CHKP’s stock is currently trading at $119.62, which is 26% above its 52-week low of $95.03 and 10% below its 52-week high of $132.76.
Is Check Point stock trading at an attractive valuation?
Check Point is trading at a forward PE multiple of 19.7x for 2019 and at 18.6x for 2020. In comparison, the company’s earnings are estimated to rise by just 6.1% in 2019 and by 6.4% in 2020, indicating that the stock might be overvalued at current prices even if it declines by 50%. Its earnings are estimated to grow at a CAGR of 10% in the next five years, while sales might rise by 4% annually over the next three years.
Out of 36 analysts covering Check Point, 13 recommend a “buy,” and 22 recommend a “hold.” There is one “sell” recommendation. The average 12-month price target for Check Point is $122.77, indicating the stock is trading at a discount of just 2.6% to average estimates.