Check Point Software Technologies (NASDAQ:CHKP) has been chugging along nicely over the past few months thanks to the tailwinds created by the novel coronavirus pandemic. Though the cybersecurity specialist had pulled its annual guidance in April, citing the uncertainty caused by COVID-19, its results have shown that the disease has failed to slow down its momentum. Not surprisingly, Check Point stock has also done impressively of late.

Check Point's rally isn't surprising, as the company is taking advantage of the shift toward a remote working model in the wake of the pandemic, and beating Wall Street's expectations on the back of increased demand for its services. A similar trend was seen in the company's recent fiscal second-quarter results.

CHKP Chart

CHKP data by YCharts

Check Point is on the right track

Check Point's second-quarter revenue increased 4% year over year to $506 million, and non-GAAP earnings increased 15% to $1.58 per share. Wall Street would have settled for $1.43 per share in earnings on $488.2 million in revenue. However, Check Point didn't provide guidance, citing "high levels" of uncertainty in the business environment.

But that shouldn't dampen investors' spirits, as the company showed progress across the board last quarter. Its subscription revenue increased 10% year-over-year to $164 million, accounting for nearly a third of the total revenue. More importantly, Check Point achieved higher subscription revenue at a reduced cost. The company's cost of security subscriptions declined to $6.1 million during the quarter from $6.5 million in the prior-year period.

As a result, Check Point's net income increased by nearly 6% year over year during the quarter. And earnings per share increased by an even bigger margin thanks to a lower share count, as the company has been taking advantage of its lower valuation to repurchase shares.

Abstract shield depicting cybersecurity.

Image source: Getty Images.

More importantly, Check Point seems set to sustain this momentum in the forthcoming quarters. Though the company didn't provide specific details about customer wins during the quarter, it did say that there was "a healthy increase in large deals" last quarter. Check Point CEO Gil Shwed pointed out that the company has been able to land customers from new verticals amid the pandemic. He said on the latest earnings conference call:

...[W]e had some nice customer wins this quarter. We continue to see strength in our regular segments such as financial services, but what surprised me is the success we've seen from other customer segments. We had some major deals in the healthcare, government, technology, transportation, communication, and even hospitality. Landing seven- and eight-digit deals during this period in this sector is clearly not trivial.

However, Check Point's deferred revenue growth of 4% last quarter wasn't very impressive. Deferred revenue refers to the money collected by a company in advance for services that will be provided later, thus providing an idea of future revenue growth for companies like Check Point that sell subscriptions. For comparison, the company's deferred revenue growth in the prior-year period was much more impressive at 11%.

The slowdown may be a result of customers' "request for billing or payment concessions" as CFO Tal Payne pointed out. This does create some uncertainty about Check Point's near-term prospects, but investors shouldn't worry much, as the company has a strong balance sheet that should help it navigate any headwinds.

A few more positives

Check Point exited the second quarter with nearly $3.96 billion in cash, marketable securities, and short-term deposits. It didn't have any debt at the end of the quarter.

Along with this solid balance sheet, Check Point also has an attractive valuation. It has a trailing price-to-earnings (P/E) ratio of 22 and a forward earnings multiple of 19, making it much cheaper than fast-growing peers such as Palo Alto Networks or Fortinet.

CHKP PE Ratio (Forward) Chart

CHKP PE Ratio (Forward) data by YCharts

As such, investors looking for a value stock within the cybersecurity space that's delivering stable growth and has a strong balance sheet should consider Check Point Software Technologies, as it has held its ground well in these unprecedented times.

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