NEW YORK ( TheStreet) -- It never ceases to amaze me to see just how inconsistent investors really are when it comes to either offering a standing ovation or applying punishment to stocks based on their earnings results. It seems lately that Wall Street has an unspoken set of standards applied to some stocks that are not required for others. Embarrassingly, this is something (although not new) that I probably will never get use to: how does one conduct comparable or relative analysis based on factors that may or may not matter to analysts? Sometimes this can be catastrophic for investors. Some stocks can get away with reporting results that were considered "less bad" while others get hammered for missing the slightest of expectations -- even to the upside. Remarkably this happens consistently with companies that are within the same sector. Fairly or unfairly, this is where enterprise security company Check Point Software ( CHKP) finds itself after a post-earnings selloff that saw the stock plummet to new 52-week lows, whereas rival Juniper ( JNPR) saw its stock rise after posting results that were merely "not as bad as expected."
In terms of outlook, the company is expecting adjusted earnings to arrive in the range of 74 cents to 77 cents per share -- in line with analysts' expectations of 76 cents per share -- on revenue of $324 to $336 million -- below analysts' forecast of $334.2 million. On the announcement, the stock gapped down almost 23% below the prior day's closing price. However, I could never really see the reason for the selloff as the report was anything but terrible. What concerned the market was what appeared to be slowing growth as product licensing increased by only 5% from the previous year after having grown 13% in 2011. And it didn't help matters that the company did not raise guidance. But was the judgment justified?
As the table shows, Check Point maintains a considerable amount of value relative to its peers and suggests that this selloff has been somewhat exaggerated. Not only is the company increasing margins at an impressive rate, but its operating margin is 63% higher than Fortinet ( FTNT), arguably its biggest competitor from the standpoint of focused security. For that matter, not only is Fortinet more expensive, but it doesn't measure up when comparing its ability to migrate from strict enterprise security to hardware services -- only Cisco and Juniper can compete in that area. Looking at this chart tells me that investors have become concerned with the company's ability to maintain its growth. The selloff could have possibly been averted it Check Point had raised guidance, but that was not the case. The company's challenge now is to convince the market that this is not a trend that will prove to be anything other than some minor turbulence.
The company did a pretty good convincing job by announcing that it bought back 1.29 million shares in the quarter for approximately $75 million and added that it now has $3.12 billion in cash and investments -- an increase from $2.57 billion a year ago. But will it be enough for now?