The good news is that Check Point is fairly well positioned for growth. The company’s ‘blade’ architecture, a modular system that allows devices to be connected to a central security solution, offers it greater flexibility than competing software solutions. Instead of purchasing several separate products, companies can just add these modular features to their existing solution. These software blades are still showing double-digit year-over-year growth, and this is expected to continue.
Whereas Check Point Software Technologies Ltd. (NASDAQ:CHKP) is traditionally regarded as occupying the higher-end of the enterprise security software market, the introduction of its 600 Series Appliances will allow it to compete with lower-end suppliers such as Fortinet. Costing between $400 and $1200 dollars, the system is aimed at smaller businesses, while still offering a comprehensive range of solutions including Next Generation Firewall and Threat Prevention. This release netted the company a Network World Clear Choice award, beating out the competition’s offerings.
Finally, the company also seems to be growing in its bread-and-butter high end security solutions. Deals of $50,000 or larger comprised 68% of total orders versus 66% a year ago. Additionally, the firm’s average selling price is on the increase, which presumably means that customers are willing to pay more for top-notch security software. All this leads to a fairly optimistic outlook for the next quarter.
Valuations and Metrics
Not a particularly expensive stock, Check Point currently trades at 18.94 times trailing earnings, which is below the 23.2 industry average. For comparison, Cisco Systems, Inc. (NASDAQ:CSCO) trades at 14.45 and Fortinet Inc (NASDAQ:FTNT) at 58.05. The price-to-book isn’t too high either at 3.38. The return on equity of 18.68% is decent, and as mentioned before, the margins are excellent. Finally, the company has zero debt and around $1.24 billion in cash.
The Bottom Line
The growing occurrence of cybercrime has naturally led to a growing importance of security software, especially in the public sector and the corporate world. There are several companies active in this segment, but Check Point seems to have a leading position in the network security market. With several factors expected to lead to continued growth for the company, it looks like a solid bet, and moreover isn’t too expensive at the moment.
The article Opportunities in Security Software originally appeared on Fool.com and is written by Daniel James.
Daniel James has no position in any stocks mentioned. The Motley Fool recommends Check Point Software Technologies and Cisco Systems (NASDAQ:CSCO). The Motley Fool owns shares of Check Point Software Technologies.
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