Check Point (CHKP) stock was another company that we had identified as an overvalued stock in April. Check Point stock has since declined by 10.5% to close trading at $117.78. Despite the recent pullback, Check Point stock is still up by 14.7% in 2019. So what does this mean for investors? Is Check Point now trading at an attractive valuation? Not quite.
Sign up for Bagels & Stox, our witty take on the top market and investment news, straight to your inbox! Whether you’re a serious investor or just want to be informed, Bagels & Stox will be your favorite email.
Wall Street expects Check Point to grow sales by just 4.1% over the next two years. In comparison, the company’s EPS are estimated to rise 6.1% in 2019 and 6.4% in 2020. Check Point’s EPS are expected to rise at a CAGR of 10% in the next five years.
Forward PE multiple
Check Point has a forward PE multiple of 18.3x. So does it make sense to pay 18 times for 6% growth next year? Check Point is also growing at a pace that is slower than the global market.
The cybersecurity space is robust and growing at a double-digit rate. Check Point’s low single-digit growth is less than impressive. It competes with network security giants such as Cisco (CSCO), Palo Alto (PANW), and Fortinet (FTNT).
While Cisco is able to grow at a comparable rate to the cyber security market, PANW and Fortinet easily beat global cybersecurity growth last year.
Analyst price target
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 $122.77, which indicates a potential upside of 4.2% from its current level.