Aladdin Knowledge Systems (NASDAQ:ALDN), a software digital rights management (DRM) and enterprise security vendor, reminds me of Check Point Software (NASDAQ:CHKP) in a way. Both are well-managed Israeli security companies that seem unreasonably cheap. I've already mentioned several potential reasons for Check Point's cheapness that also would apply to Aladdin (i.e., a growth discount and an "Israeli discount" because of the current instabilities in the region).

In Aladdin's case, I might add the fact that employee turnover in both the trenches and upper management has caused some transition difficulties. The latest examples would be the chief financial officer and the CEO of Aladdin North America resigning Monday with the earnings announcement.

The third-quarter earnings report was a mixed bag for investors. While operating cash flow was $3.5 million, bringing the cash hoard to $85.1 million, or roughly a third of the company's current market cap, revenue and earnings growth was light. Revenues were only up 7% to $21 million year over year, while earnings per diluted share were down 10% to $0.22 over the same time frame, partly because of stock compensation charges. The highlight of the quarter was the 26% growth in Enterprise Security revenues, and this portends a strong growth area for the future.

That's good news, because Aladdin does have some challenges ahead of it. For one thing, EMC (NYSE:EMC) acquired authentication kingpin RSA Security recently, making it even more formidable with EMC's backing. SafeNet (NASDAQ:SFNT) is also a key competitor that leads the USB hardware market. Furthermore, the rise of the Software as a Service (SaaS) trend -- as described eloquently in this article by fellow Fool John Finneran and exemplified by (NYSE:CRM) -- requires software features that Aladdin currently doesn't offer.

Still, Aladdin is the leader in the authentication token market and has substantial opportunities going forward in terms of DRM security and enterprise security. Microsoft's (NASDAQ:MSFT) recent emphasis on greater DRM and licensing enforcements for Windows Vista serves as a good reminder of the importance of this industry and may drive new business for Aladdin and related vendors.

Aladdin has some hefty opportunities in front of it and, when subtracting out the cash on the books, trades for a P/E in the 10-12 range. This means that investors can acquire a company that's only priced for modest growth in the next few years. Granted, the firm's sales growth over the last few years hasn't set the world on fire, but any resurgence could quickly push the stock to higher levels. That's a bet that investors should be considering.

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Fool contributor Stephen Ellis doesn't hold shares in any companies mentioned. You can see his holdings for yourself . The Motley Fool has a fortress-like disclosure policy .