5 Stocks That Just Won't Quit

In my weekly Fool column "Get Ready for the Fall," I run Nasdaq.com's 52-week highs list through the "wisdom of crowds" meter we call Motley Fool CAPS. The result: a list of stocks that have flown so high, investors are starting to get nervous about that whole "gravity" thing. But while many stocks will indeed plunge back to Earth, some seem immune to gravity, steadily riding a rising megatrend to ever-greater heights.

Today, we'll move beyond stocks that have hit 52-week highs, and identify companies now surpassing five solid years of outperformance. Which of these will thrash the market averages for another half-decade? Here are this week's leading contenders:

Companies are selected from the "New 5-Year Highs" list published on MSN Money on Friday. CAPS ratings from Motley Fool CAPS.

Few investors would argue that 2009 was a "great" year for stocks in general, but every rule has its exception, and you can find five such exceptions up above. Five stocks that haven't just thrived this year, but actually hit their highest peaks in half a decade.

The contrast between these winners' performance and the rest of the market's couldn't be clearer, yet as we can see today, investors pan two of the five, shrug at two more, and give only one company the thumbs-up. (Could it be that even for successful stocks, valuation still matters?) Whatever the reason, our choice today is clear: We've got exactly one above-average rated company to choose from, and that's why we'll be discussing ...

The bull case for Check Point Software
This past summer, CAPS All-Star FoolSolo dropped by to sing the praises of Check Point's: "solid fundamentals ... products that are in a growth area of the tech industry ... zero debt ... and half a billion in cash." Summing it all up, FoolSolo argued the company will "do fine as technology spending will bounce back before the economy turns completely around."

Fellow All-Star akneefel agrees, adding that "the new defense budget has an increase of $20 Billion and a tenth of that specifically focuses on surveillance and security technology." (Check Point's forte.) Concludes akneefel: "CHKP will benefit."

And maybe not just Check Point. Yet another of our best investors, wgkoch this time, predicts that Check Point "[c]ould be a merger candidate with one of a few bigger Internetwork fish [that is] light on security and open minded politically."

Reality Check(Point): Is it takeover bait?
I agree with wgkoch. Check Point seems made-to-order for easy digestion by "bigger fish" such as Cisco Systems (NASDAQ:CSCO) or Microsoft (NASDAQ:MSFT). At just $7.1 billion in market cap, this company would cost mere pocket-change for either Internet titan. And in fact, they wouldn't even need to ante up the whole purchase price on their own. FoolSolo spotlighted the company's "over half a billion in cash" six months ago, and the company continues to generate a substantial amount of cash and cash equivalents with no debt whatsoever.

How did Check Point double its cash stash in six months flat? I've got four words for ya: "Monster free cash flow." Over the last 12 months, this company generated nearly $500 million in free cash from its business. Not only did that fill out its corporate coffers right quick; it also tells us that the company's apparently rich valuation -- 22 times trailing earnings of $334 million -- isn't really as expensive as it seems.

These "earnings," after all, represent only the "accounting profit" that GAAP standards permit Check Point to report for the year. Free cash flow, in contrast, stands much higher, giving us a valuation of just 14 times for the stock (and the enterprise value is even lower, given Check Point's cash hoard.)

Time to chime in
Of course, "cheap-er" isn't quite the same thing as "cheap, period." While Check Point is certainly cheaper than its P/E makes it look, I fear the firm's going to have to do better than the 11% annualized five-year growth rate Wall Street expects of it in order to make this stock a bargain.

Or so say I. You, however, are free to disagree. And heck, we'll even give you a place to argue why Check Point might be worth owning at today's price. Click over to Motley Fool CAPS now, and tell us what you think -- about Check Point, about its potential acquirers, about whatever's on your mind.