Check Point Software Overview
February 24, 2005 - Copyright by Morris Rosenthal - - contact info
Company Overviews
Copyright 2005 by Morris Rosenthal
All Rights Reserved
Notes on trading CHKP stock for investing in Israeli stocks
Check Point Software trades on the NASDAQ under the symbol CHKP. There is another company with a similar name and symbol (Checkpoint Systems, a maker of RF ID systems trading as CKP) which I'm sure has led to the occasional investing error. Check Point is a world leader in computer security software, and it has products ranging from corporate firewalls to consumer PC protection. Check Point is in an excellent financial position, with approximately $1.5 billion in cash ($6.20/share), and has been re-purchasing its own shares, to the tune of 12 million in 2004 for $245 million. Checkpoint acquired Zone Labs in 2004 for around $200 million in cash and stock. I'm still trying to figure out the balance sheet for the exact price.
Over 90% of Check Point's revenues are derived from licenses and subscriptions, with the remainder coming from software services. Revenues in 2004 were up 19% year-over-year for a total of $515 million. R&D expenses at $43.2 million came to a mere 25% of marketing expense at $132.8 million, which is a pretty good indication of a mature company. Administration and general overhead costs were $23.6 million, up 33% year-over-year. CHKP earned $0.95 per share in 2004, down a penny from the previous year. For some reason, they like reporting an alternative method for computing earnings that excludes certain expenses for R&D and acquisitions. Using that method, they report $1.07 per share for 2004. I printed the annual report and went through it once without understanding why they should ignore certain expenses, but I couldn't find the Zone Labs price either, so what do I know.
I'm not a chartist, but if you look at a lifetime chart for CHKP's stock price and ignore the NASDAQ bubble, you can pretty much draw a straight line from the IPO price to the current value. Check Point came public in 1996, before the days of bizarre IPO pricing, and with the exception of the X10 excursion during the bubble, the stock has been very well behaved for a tech stock. It currently trades at a multiple of a little over 23 (using the $0.95/share, not the $1.07). In fact, that $1,07 is the only fly in the ointment that gives me pause about buying the stock right now, so I'm going to do some more homework and try to work it out.
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