Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Checkpoint Systems
So what: The company's challenges were evident as fourth-quarter revenue fell 1% year-over-year. Both GAAP EPS of $0.19 and non-GAAP EPS declined from the year-ago quarter (60% and 39%, respectively) due to gross margin pressure, restructuring expenses and acquisition-related costs.
Now what: Guidance for 2011 assumes significant improvement after a challenging 2010, calling for non-GAAP EPS of $1.27 to $1.41 compared with $1.00 in 2010 and the consensus estimate of $1.34. The stock's forward P/E ratio based on non-GAAP guidance is a reasonable 15.1 to 16.8. However, there was no GAAP guidance, and the P/E ratio is a rich 31.8 times GAAP EPS for both 2009 and 2010. With retail still under pressure, the risk/reward on this stock appears unattractive.
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