Internet security expert Check Point Software Technologies
For the fourth quarter, total revenues increased 9% to $156.1 million. Operating income improved by 17%, totaling $93.3 million. Net income was $89.2 million ($0.36 per diluted share) compared to $76.4 million ($0.30 per diluted share) in the year-ago period. That's 17% earnings growth year over year.
For all of 2005, revenues jumped 12% to $579.4 million. Operating income grew by 27%, coming in at $331.7 million. Net income was $319.7 million ($1.27 per diluted share) versus $248.4 million ($0.95 per diluted share) for 2004, an appreciation of 29%.
It looks like Check Point had a nice year. The financial tale is positive on the cash-flow side as well. For the quarter, net cash from operating activities increased 11% to $81.5 million; free cash flow also jumped 11% to $80.1 million. For the full year, net cash from operating activities increased 22% to $346.9 million; free cash flow again expanded by the same percentage, coming in at $342.1 million.
Looking at some key stats, we can see that Check Point does well on profit margins, return on assets, and return on equity. It has no long-term debt and a reasonable enterprise value-to-free cash flow ratio of 12. All in all, I'm impressed.
Yet the stock hasn't exactly rocketed after the fourth-quarter news. For one thing, guidance wasn't what the market wanted to hear. In addition, investors seeking growth might balk at paying up for a company whose near-term growth rate isn't necessarily spectacular -- Check Point isn't expected to fare much better than the overall market. Given its high P/E-to-growth ratio, that isn't necessarily enticing. A look at the long-term chart also shows Check Point's rocky past, which doesn't necessarily portend a benign future.
I like the Internet security sector, and I believe it will be an important industry going forward. But there's a lot of competition here, including RSA Security
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Fool contributor Steven Mallas owns none of the companies mentioned. The Fool has a disclosure policy.