When everything is going down, the best mindset to have is a long term one. Longstanding stocks such as Check Point Software Technologies Ltd has fared well over time in a volatile stock market, which is why it’s my top pick to invest in. Below I take a look at three key characteristics of what makes a strong defensive stock investment: its size, financial health and track record. Check out our latest analysis for Check Point Software Technologies
Check Point Software Technologies Ltd. provides hardware and software products and services for IT security worldwide. Formed in 1993, and led by CEO Gil Shwed, the company provides employment to 4,281 people and with the company's market cap sitting at US$17.09B, it falls under the large-cap stocks category. Generally, large-cap stocks are well-resourced and well-established meaning that a bear market will cause it to rejig some short-term capital allocations, but stock market volatility is hardly detrimental to its financial health and business operations. Therefore large-cap stocks are a safe bet to buy more of when the wider market is going down and down.
Having high levels of debt can put pressure on companies during downturns since they have to continuously service their debt payments and interest costs. This means they need to maintain enough cash-on-hand for these expenses as well as maintain a cash cushion for unforeseen circumstances, which can get costly. In Check Point Software Technologies's case, they have no debt on the books, which eliminates short-term debt pressures highly-levered companies may face. Check Point Software Technologies's enviable cash position of US$1.41B provides it with more than enough liquidity to meet other near-term liabilities, placing it in a financially robust standpoint in the face of uncertainty.
CHKP’s annual earnings growth rate has been positive over the last five years, with an average rate of 5.76%, beating the It has also returned an ROE of 22.30% recently, above the industry return of 12.42%. This continuous market outperformance demonstrates a strong track record of delivering robust returns over many years, raising my confidence in Check Point Software Technologies as a long-term hold.
Next Steps:Based on these three factors, CHKP makes for a strong long-term investment in the face of a fickle stock market. If you’re a risk averse investor, lining your portfolio with proven companies you’re willing to buy more and more of as the price falls, is a good strategy to build your wealth over the long run. This is the beginning of your research, but before you decide to buy CHKP, I highly urge you to understand more about the company, in particular, in these following areas:
- Future Outlook: What are well-informed industry analysts predicting for CHKP’s future growth? Take a look at our free research report of analyst consensus for CHKP’s outlook.
- Valuation: What is CHKP worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CHKP is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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