An easy way to profit from the stock market is to buy an index fund. But if you pick the right individual stocks, you can earn more than that. Just take a look Check Point Software Technologies Ltd. (NASDAQ:CHKP), up 62% over three years, easily beating the market return of 23% (excluding dividends). On the other hand, returns haven’t been great lately, with shareholders up just 25%.
So let’s take a look at the underlying fundamentals over the last three years and see if they have kept pace with shareholder returns.
Check out our latest analysis for Check Point Software Technologies
Although the efficient markets hypothesis is still taught by some, it has been proven that markets are over-reactive dynamic systems and that investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Check Point Software Technologies achieved compound earnings per share growth of 7.3% per year. This earnings per share growth is lower than the average annual share price increase of 17%. This indicates that the market is more bullish on the stock after recent years of progress. That’s not necessarily surprising, given its three-year track record of earnings growth.
The company’s earnings per share (over time) are shown in the image below (click to see the exact numbers).
It’s probably worth noting that the CEO is paid less than the median at similarly sized companies. It’s always worth keeping an eye on CEO pay, but the more important question is whether the company will grow profits over the years. Dive deeper into the earnings by checking this interactive graph of Check Point Software Technologies’ earnings, revenue and cash flow.
Check Point Software Technologies has achieved a TSR of 25% over the last twelve months. But that return lags behind that of the market. On the plus side, that’s still a gain, and it’s even better than the 10% average return over half a decade. This suggests that the company may be improving over time. Before forming an opinion on Check Point Software Technologies, you may want to consider these three valuation metrics.
For those who like to search winning investments this free list of undervalued companies with recent insider purchasing could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article from Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. We aim to provide you with targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or quality material. Simply Wall St has no positions in the stocks mentioned.
