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Check Point Software Technologies (CHKP) Falls Further As It's Water-Logged And Getting Wetter

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Check Point Software Technologies ( CHKP) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Check Point Software Technologies as such a stock due to the following factors:

  • CHKP has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $49.6 million.
  • CHKP has traded 93,982 shares today.
  • CHKP traded in a range 240.9% of the normal price range with a price range of $3.24.
  • CHKP traded below its daily resistance level (quality: 133 days, meaning that the stock is crossing a resistance level set by the last 133 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on CHKP:

Check Point Software Technologies Ltd. develops, markets, and supports a range of software, combined hardware, and software products and services for information technology (IT) security worldwide. CHKP has a PE ratio of 20.1. Currently there are 14 analysts that rate Check Point Software Technologies a buy, no analysts rate it a sell, and 7 rate it a hold.

The average volume for Check Point Software Technologies has been 1.1 million shares per day over the past 30 days. Check Point Software has a market cap of $12.9 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 0.91 and a short float of 1.3% with 2.04 days to cover. Shares are up 1.9% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Check Point Software Technologies as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:

  • CHKP's revenue growth has slightly outpaced the industry average of 4.6%. Since the same quarter one year prior, revenues slightly increased by 5.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CHKP has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, CHKP has a quick ratio of 1.58, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 50.13% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CHKP should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • CHECK POINT SOFTWARE TECHN has improved earnings per share by 16.5% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, CHECK POINT SOFTWARE TECHN increased its bottom line by earning $3.28 versus $2.97 in the prior year. This year, the market expects an improvement in earnings ($3.65 versus $3.28).
  • The gross profit margin for CHECK POINT SOFTWARE TECHN is currently very high, coming in at 88.66%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 50.15% significantly outperformed against the industry average.

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