We can clearly see that Check Point beat both Cisco Systems, Inc. (NASDAQ:CSCO) and Juniper Networks, Inc. (NYSE:JNPR) in terms of margins and return on capital. Its operating margin and net margin were two times higher than those of Cisco. In the past 12 months, Check Point generated as high as a 45.2% net margin, while Cisco’s net profit margin was only 19.72%. Check Point’s return on invested capital of 19.33% was much higher than Cisco’s ROIC of 12.75%. Juniper, with the lowest margins and return on capital, is the least profitable company among the three. Furthermore, even with the most profitable operation, Check Point didn’t use any leverage, whereas Juniper and Cisco employed some debt, with 0.1x and 0.3x in debt/equity ratio, respectively.
Valuation-wise, Cisco Systems, Inc. (NASDAQ:CSCO) has the cheapest valuation compared to both Check Point and Juniper Networks, Inc. (NYSE:JNPR). With a total market cap of over $111 billion, Cisco is valued at only 6.1x EV/EBITDA. Juniper, a much smaller company with only $10.9 billion in total market cap, is valued the most expensive, at 17x EV/EBITDA. Check Point Software Technologies Ltd. (NASDAQ:CHKP) seems to be quite reasonably valued at 11.53x EV/EBITDA.
My Foolish Take
With a significantly high profit margin, return on capital, a conservative capital structure, and a reasonable valuation, Check Point seems to be a nice investment opportunity for long-term investors at its current trading price.
The article This Network Security Company Is Definitely a Value Buy originally appeared on Fool.com and is written by Anh HOANG
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