The yearly results for Check Point Software Technologies Ltd. (NASDAQ:CHKP) were released last week, making it a good time to revisit its performance. Results were roughly in line with estimates, with revenues of US$2.0b and statutory earnings per share of US$5.43. This is an important time for investors, as they can track a company's performance in its report, look at what top analysts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from Check Point Software Technologies's 30 analysts is for revenues of US$2.04b in 2020, which would reflect a reasonable 2.3% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to rise 3.0% to US$5.64. Before this earnings report, analysts had been forecasting revenues of US$2.05b and earnings per share (EPS) of US$5.73 in 2020. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$118. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Check Point Software Technologies analyst has a price target of US$145 per share, while the most pessimistic values it at US$95.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.
Zooming out to look at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up both against past performance, and against industry growth estimates. We would highlight that Check Point Software Technologies's revenue growth is expected to slow, with forecast 2.3% increase next year well below the historical 5.6%p.a. growth over the last five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 12% next year. So it's pretty clear that, while revenue growth is expected to slow down, analysts still expect the wider market to grow faster than Check Point Software Technologies.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on Check Point Software Technologies. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Check Point Software Technologies analysts - going out to 2024, and you can see them free on our platform here.
We also provide an overview of the Check Point Software Technologies Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.
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