CHKP 174.7 (+1.54%)
IL0010824113SoftwareSoftware - Infrastructure

Last update on 2024-06-07

Check Point Software Technologies (CHKP) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Explore Check Point Software Technologies' (CHKP) Piotroski F-Score Analysis for 2023. Achieved a score of 8/9 on profitability, liquidity, and operational efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 8

We're running Check Point Software Technologies (CHKP) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
1
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

Check Point Software Technologies (CHKP) has a high Piotroski F-Score of 8, indicating a strong financial position. The company's profitability is robust with a consistently positive net income, growing return on assets, positive operational cash flow exceeding net income, and an improving gross margin and asset turnover ratio. In terms of liquidity, CHKP has been underperforming lately with a current ratio decline, marking a potential concern in managing short-term liabilities. Despite increasing leverage in 2023 for the first time in two decades, the company has demonstrated strong share buybacks indicating a focus on shareholder value.

Insights for Value Investors Seeking Stable Income

Given the strong Piotroski F-Score of 8 and remarkable historical and current performance metrics, Check Point Software Technologies (CHKP) appears to be a solid investment option. However, potential investors should keep an eye on the recent increase in leverage and declining current ratio, as these factors could indicate emerging financial challenges. Overall, CHKP seems to be a robust company with a strong financial track record, making it worth considering for your portfolio.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Check Point Software Technologies (CHKP)

Company has a positive net income?

Netincome is an essential criterion in the Piotroski analysis as it assesses profitability, ensuring the company is generating positive earnings.

Historical Net Income of Check Point Software Technologies (CHKP)

Check Point Software Technologies' net income for 2023 is $840,300,000. This is a positive value, indicating a profitable year. Furthermore, historically, the company has consistently shown positive net income over the past 20 years, which underscores financial stability and robust profitability. Given this data, the criterion for net income scores 1 point. Strong and consistent profitability as shown is a hallmark of operational efficiency and business resilience, making CHKP a reliable candidate from a profitability standpoint.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's regular business operations. It indicates the company's ability to generate sufficient cash flow to maintain and grow its operations without relying on external financing.

Historical Operating Cash Flow of Check Point Software Technologies (CHKP)

For Check Point Software Technologies (CHKP), the Cash Flow from Operations (CFO) in 2023 is $1,037,900,000, which is positive. This implies a strong cash-generating capability from the core business operations. This metric has consistently been positive over the last 20 years, with CFO ranging from $290,885,000 in 2003 to $1,161,000,000 in 2020. Thus, CHKP earns 1 point for maintaining positive cash flow from operations, indicating continued financial health and operational efficiency.

Return on Assets (ROA) are growing?

This criterion examines the change in Return on Assets (ROA) from one year to the next to assess profitability trends.

Historical change in Return on Assets (ROA) of Check Point Software Technologies (CHKP)

In 2023, Check Point Software Technologies (CHKP) reported an ROA of 0.1472 compared to an ROA of 0.1371 in 2022. This indicates an increase in ROA, adding 1 point to its Piotroski score. This upward trend is favorable, suggesting enhanced asset utilization in generating profits. Across the last two decades, while the industry median ROA displayed higher averages annually, CHKP's ROA trends spotlight its competitive positioning and profit efficiency concerns needing continued strategic focus.

Operating Cashflow are higher than Netincome?

Check Point Software Technologies (CHKP)

Historical accruals of Check Point Software Technologies (CHKP)

The Operating Cash Flow (OCF) for Check Point Software Technologies (CHKP) in 2023 is $1,037,900,000, which is greater than the Net Income (NI) of $840,300,000. This relationship is crucial since higher OCF than NI often indicates strong operational effectiveness and favorable earnings quality. Customers paying in advance or ongoing efficient collections can lead to this, reflecting that earnings are backed by cash rather than just accounting assumptions or estimations.

Liquidity of Check Point Software Technologies (CHKP)

Leverage is declining?

Change in leverage examines the variation in debt levels from one year to the next, allowing insight into a company's financial risk.

Historical leverage of Check Point Software Technologies (CHKP)

Examining Check Point Software Technologies (CHKP), we see that leverage has been consistently zero for the past 20 years. However, in 2023, leverage increased, setting apart the company's debt levels for the first time in two decades. While an increase in leverage may suggest that CHKP has taken on new debt—possibly for expansion or development—this breaks a long-standing trend. Therefore, this criterion scores 0 points due to the increase in leverage. It's pivotal to scrutinize the reasons behind this uncharacteristic change, as it might indicate a new strategy or unforeseen financial stress.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term obligations with its current assets. A higher ratio indicates better liquidity.

Historical Current Ratio of Check Point Software Technologies (CHKP)

In 2023, Check Point Software Technologies (CHKP) recorded a current ratio of 1.1783, a decrease from 1.2678 in 2022. This means the current ratio declined, thereby receiving 0 points under the Piotroski criteria. Historically, compared to the industry median, CHKP has recently been below the industry's median current ratio of 1.5348, which could signal a relatively weaker liquidity position. While in the early 2000s, the company generally maintained a current ratio significantly above the industry median, this trend has reversed in recent years indicating challenges in managing short-term liabilities effectively.

Number of shares not diluted?

Change in Shares Outstanding is a measure to see if the company is taking actions such as buybacks which can benefit shareholders by increasing the value of the remaining shares.

Historical outstanding shares of Check Point Software Technologies (CHKP)

For Check Point Software Technologies (CHKP), the Outstanding Shares decreased from 125,205,504 in 2022 to 116,900,000 in 2023. This reduction in Outstanding Shares results in adding 1 point according to the Piotroski criteria. The trend is favorable for shareholders as it indicates share buybacks, which typically lead to an increase in earnings per share (EPS) and potentially the stock price. Looking at the historical data, the number of outstanding shares has consistently declined over the past two decades, dropping from around 255 million shares in 2003 to approximately 117 million in 2023. This long-term trend of reducing Outstanding Shares amplifies the positive impact on shareholder value.

Operating of Check Point Software Technologies (CHKP)

Cross Margin is growing?

Gross Margin is a critical indicator of a company's financial health, as it shows the percentage of revenue that exceeds the cost of goods sold (COGS), essentially reflecting a company's operational efficiency and profitability.

Historical gross margin of Check Point Software Technologies (CHKP)

For Check Point Software Technologies (CHKP), the Gross Margin increased from 0.8694 in 2022 to 0.883 in 2023. This marks an improvement in operational efficiency. Specifically, the 2023 Gross Margin of 0.883 is not only an increase over the previous year but also notably higher than the industry median Gross Margin for 2023, which stands at 0.715. Historically, Check Point has consistently outperformed the industry median, as seen from the last 20 years of data. This upward trend in Gross Margin is a positive indicator for the company, earning it a point in this criterion.

Asset Turnover Ratio is growing?

The change in Asset Turnover shows us how effectively a company is using its assets to generate sales, indicating improvements or declines in operational efficiency.

Historical asset turnover ratio of Check Point Software Technologies (CHKP)

In 2023, Check Point Software Technologies (CHKP) witnessed an increase in its Asset Turnover ratio to 0.4229 from 0.4008 in 2022. This rise indicates improved efficiency in using its assets to generate sales, adding 1 to the Piotroski score. Historical data illustrates a steady climb from 0.2756 in 2003 to the current figure, suggesting long-term enhancements in asset utilization. The trend is favorable, underscoring the company's improved operational efficiency.


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