Check Point investors have become insecure ever since the company reported disappointing fourth-quarter earnings. Consequently, the stock has been in a lull ever since. Complicating matters is that new entrants like Palo Alto Networks and Sourcefire are generating considerable buzz.

While Check Point still has a sizable market lead in enterprise network security, investors are unsure of what to make of the company’s recent lack of momentum. Some are suggesting that Check Point‘s “tech card” should be revoked after the company posted just 3% revenue growth in the fourth quarter, marking the seventh consecutive quarter of sales declines. Now, with Sourcefire only percentage points from a new 52-week high, and Palo Alto posting strong revenue numbers, it’s become “gut-check” time for Check Point.

Should investors wait or abandon the stock?
This decision really depends on where you are in the position. Unfortunately, Check Point does not offer a dividend to help pacify the time, which makes being patient more difficult. But this, too, has its limits. And, when compared to Fortinet, which posted a 25% revenue increase in Q4, Check Point‘s numbers were even more disturbing. But there’s hope.

Working in Check Point‘s favor is its strong management team, which did an excellent job navigating the company through last year’s challenges, which included soft enterprise spending and a brutal fiscal European environment. But those were last year’s problems. Besides, these issues didn’t seem to affect Cisco or Fortinet, which have similar exposure.

Then, again, set aside the recent growth struggles, and glance at Check Point‘s fundamentals; you may not find a more attractive company. The top line is unappealing, yes. But the bottom line is a different story. Check Point is still growing profits at an annual rate of 9%. Again, this speaks to the quality of management that the company has – one that is able to do more with less. This means that, despite soft sales, and possible loss of share to the likes of Cisco and Fortinet, management is making each sale that it does get, count.

What’s more, it also demonstrates how highly regarded Check Point is in enterprise security. The fact that the company is able to still target higher margin businesses means that Check Point is not succumbing to pricing pressure despite the aggressiveness of Palo Alto and Sourcefire. That said, management must still get revenue going in the right direction again. Otherwise, investors will begin to question if the premium they are paying today is deserved — at least when compared to Cisco. 

Time to get more aggressive
The enterprise security space is pretty significant. Plus, with continued adoption of mobile devices within BYOD, or bring-your-own-device, this will only increase the demand for more security. However, though, it doesn’t appear as if Check Point cares much about growth. It sounds like a ridiculous claim, but the evidence has not been there. And the company has underinvested in some key areas.

For instance, aside from buying Dynasec in 2011, Check Point has not been aggressively expanding its enterprise footprint — at least not to the extent …read more
Source: FULL ARTICLE at DailyFinance