Headquartered in Tel Aviv, Israel, Check Point (CHKP) is developing and marketing a range of products and services for IT security worldwide. The company offers network security, endpoint security, data security, and management solutions. On the other hand, CrowdStrike Holdings, Inc. (CRWD) provides cloud-delivered protection across endpoints and cloud workloads, identity, and data. It offers threat intelligence, managed security services, IT operations management, and threat hunting.
Given the accelerated move to cloud computing, the hybrid lifestyle, and rapid digitization have led to many ransomware attacks. With the worldwide resurgence of COVID-19 cases and the Russia-Ukraine war escalating, cybersecurity companies should witness steady demand for their products and services. According to Grand View Research, the global cyber security market is expected to grow at a CAGR of 10.9% until 2028. Therefore, both CHKP and CRWD should benefit.
CHKP has gained 19.5% over the past six months, while CRWD has returned 15.5%. Also, CHKP’s 22.5% gains year-to-date are significantly higher than CRWD’s 6.6% returns. Moreover, CHKP is the clear winner with 20.7% gains versus CRWD’s negative returns in terms of the past nine months’ performance.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On March 2, 2022, CHKP launched a new go-to-market organization headed in Silicon Valley. CEO at CHKP Gil Shwed said, “Check Point recently published its strongest quarterly results and we have already launched several important initiatives that will help us accelerate our business momentum. Today we announce another significant step in this direction, with the launch of our new global go to market organization.”
On April 7, 2022, CRWD announced being granted a Provisional Authorization to Operate at Impact Level 4. This important authorization will enable CrowdStrike to now deploy CrowdStrike’s Falcon cybersecurity platform to a broad range of Department of Defense and Defense Industrial Base customers to protect their Controlled Unclassified Information. The major provisional authorization is another landmark milestone for the company’s expanding public sector business.
Recent Financial Results
CHKP’s revenue increased 6% year-over-year to $599 million for the fiscal fourth quarter ended December 31, 2021. The company’s non-GAAP operating income grew 47% year-over-year to $285 million. Also, its non-GAAP EPS came in at $2.25, up 4% year-over-year.
CRWD’s revenues increased 63% year-over-year to $431 million for the fiscal fourth quarter ended January 31, 2022. The company’s non-GAAP income from operations grew 133.7% year-over-year to $80.40 million. Also, its non-GAAP EPS came in at $0.30, up 130.8% year-over-year.
Past and Expected Financial Performance
CHKP’s revenue and total assets grew at CAGRs of 4.2% and 0.4%, respectively, over the past three years. Analysts expect CHKP’s revenue to increase 5.7% in the current year and 5.1% next year. The company’s EPS is expected to grow 3.3% in the current year and 10.2% next year. Moreover, its EPS is expected to grow at 7.7% per annum over the next five years.
On the other hand, CRWD’s revenue and total assets grew at CAGRs of 79.8% and 102.9%, respectively, over the past three years. The company’s revenue is expected to increase 48.4% in the current year and 35.2% next year. Its EPS is expected to grow 62.7% in the current year and 46.8% next year. Also, CRWD’s EPS is expected to increase at 66% per annum over the next five years.
Profitability
CHKP’s trailing-12-month revenue is 1.50 times what CRWD generates. CHKP is also more profitable, with an EBITDA margin and net income margin of 42.91% and 37.64%, respectively, compare to CRWD’s negative returns.
Furthermore, CHKP’s ROE, ROA, and ROTC are 24.26%, 9.66%, and 16.73%, compare to CRWD’s negative values.
Valuation
In terms of forward non-GAAP P/E, CRWD is currently trading at 199.27x, higher than CHKP’s 19.69x. Moreover, CRWD’s forward EV/EBITDA ratio of 125.60x is higher than CHKP’s 14.60x.
So, CHKP is relatively affordable here.
POWR Ratings
CHKP has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, CRWD has an overall rating of C, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
CHKP has a grade of A for Quality. This is justified given CHKP's 41.88% trailing-12-month EBIT margin, 369.2% higher than the industry average of 8.93%. On the other hand, CRWD has a Quality grade of C, in sync with its negative trailing-12-month EBIT margin, compared to the industry average of 8.93%.
Of the 31 stocks in the Software - Security industry, CHKP is ranked #5. In comparison, CRWD is ranked #15.
Beyond what I’ve stated above, we have also rated the stocks for Growth, Value, Momentum, Stability, and Sentiment. Click here to view all the CHKP ratings. Also, get all the CRWD ratings here.
The Winner
The demand for advanced cybersecurity solutions is expected to increase with the growing number of cybercrimes in this digital era. While both CHKP and CRWD are expected to gain, it is better to bet on CHKP now because of its lower valuation and higher profitability.
Our research shows that odds of success increase when one invests in stocks with an overall rating of Strong Buy or Buy. View all the other top-rated stocks in the Software - Security industry here.
CRWD shares were unchanged in after-hours trading Monday. Year-to-date, CRWD has gained 5.79%, versus a -7.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
CrowdStrike vs. Check Point: Which Cybersecurity Stock is a Better Buy? StockNews.com
