CHKP Is Producing Cash, What Is Holding You Back?

Here is why we think Check Point Software Technologies (CHKP) is worth a look

• Cash Yield: Not many stocks offer free cash flow yield of 5.6%, but CHKP does
• Fundamentals: Last 12 month revenue growth of 6.3% and operating margin of 33.0% show good fundamentals
• Valuation: At PE of 23.9, this combo of cash yield, revenue growth, and margin could get noticed
• Compared to S&P, you get lower valuation, higher revenue growth, and better margins

Free Cash Flow Yield refers to free cash flow per share / stock price. Why it matters? If a company produces high amount of cash per share, it can be used to fuel additional revenue growth, or simply paid through dividends or buybacks to shareholders. For quick background, Check Point Software Technologies provides cybersecurity solutions through an advanced architecture protecting against 5th and 6th generation attacks across networks, endpoints, cloud, workloads, IoT, and mobile environments worldwide.

But do these numbers tell the full story? Read Buy or Sell CHKP Stock to see if Check Point Software Technologies still has an edge that holds up under the hood.

That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure

The Point? The Market Can Notice, And Reward

Here are some stocks that showed strong cash flow yield in mid 2024, and saw strong returns in the subsequent 12 months

• FFIV gained 70% in a year after showing a 6.9% free cash flow yield
• CSCO had 6.6% yield, and returned 50% in the next 12 months
• PM rose over 85% percent as the market noticed its 5.7% free cash flow yield and good underlying revenue growth

But Consider The Risk

Check Point’s not immune to big hits either. It plunged over 80% in the Dot-Com crash, dropped around 34% in the Global Financial Crisis, and took a 31% hit during the Covid slump. Even smaller events, like the 2018 correction and last year’s inflation shock, knocked it down close to 20-27%. Strong fundamentals matter, but when sell-offs come, Check Point still feels the pain.

Picking winners on a consistent basis is not an easy task – especially given the volatility associated with a single stock. Instead, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.