As the commercial world goes ever more increasingly digital, cybersecurity needs to be a top priority for every organization that wishes to conduct business on an ongoing basis. Investors need to consider adding cybersecurity names to their portfolios since their total addressable market essentially consists of any company that operates electronically. A name to put on your radar is Check Point Software Technologies (NASDAQ: CHKP), a $19 billion developer of information security solutions.
Check Point develops and markets software products and services used in network security, data management, data security, and endpoint security across a variety of platforms including cloud, mobile, and the internet of things. The firm is based in Tel Aviv, Israel, and is diversified across geographies, with approximately 45% of sales coming from North and South America, about 43% of sales from Europe, and the remainder from Asia, the Middle East, and Africa. Check Point was founded in 1993 and sells to businesses and consumers of all sizes.

Looking at the cybersecurity space, Check Point has lagged similar size peers in recent years but has a solid history of profitability, so it could be a hidden gem hiding in plain sight. The company has an attractive EV/EBITDA ratio of 17.0, especially when compared to similarly-sized competitors like Palantir (NYSE: PLTR) and Splunk (NASDAQ: SPLK), both of which have negative EV/EBITDA ratios, at -37.4 and -18.9 respectively. Check Point has a gross margin of 88.5% and a net margin of 38.8% which compare favorably to the industry ratios of 66.8% gross and 19% net. By all accounts, the company is conservatively managed, with a corporate debt load of only about $26 million compared to about $1.7 billion in cash on the balance sheet, equivalent to about $13 per share in cash making the company even more attractively valued.
Check Point has decent coverage in the analyst community, with 17 firms providing coverage and estimates. Ratings are distributed across the spectrum with 6 Strong Buy Ratings, 1 Buy, and 5 Hold ratings. Current share price levels have risen above consensus estimates of $135.92, so CHKP could be in line for a round of target price upgrades, which could create a near-term catalyst for appreciation. The company is somewhat closely held, with insiders currently holding over 20% of the outstanding shares. This demonstrates that management’s objectives are aligned with shareholders. The company’s low beta of 0.70 provides exposure to a growing area of technology without the stomach-churning volatility that can often come with that space.
While Check Point has not been a high flyer with wild price swings, it has demonstrated steady growth and share price appreciation since coming public in 1996. Neither the physical world nor the digital world is getting safer, so cybersecurity is an essential piece of any business, and should likely be a part of just about every investor’s portfolio. Check Point Software Technologies offers a diversified play on the sector across sub-segments and geography, with sound management and a solid long-term track record of performance.
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