Check Point Software Technologies Ltd. (CHKP) F Score of 7 Placed Under the Lens

The Piotroski F-Score is based on a 1-9 score which helps determine a company’s financial strength.  The score can additionally helps determine if a company’s stock is valuable or not.  The Piotroski F-Score of Check Point Software Technologies Ltd. (CHKP) is 7.  A score of nine indicates a high value stock, while a score of one indicates a low value stock.  Needless to say, any stock close to the 1 mark should require intense additional due diligence. The score is calculated by the return on assets (ROA), Cash flow return on assets (CFROA), change in return of assets, and quality of earnings.  It is also calculated by a change in gearing or leverage, liquidity, and change in shares in issue.  The score is also determined by change in gross margin and change in asset turnover.

Stock market investing can indeed tug on an individual’s emotional strings. When the market becomes tumultuous, investors may be tempted to act impulsively, or they may freeze and not act at all. Being prepared for various scenarios may help the investor better deal with the market when the time comes. Staying disciplined with portfolio rebalancing and asset allocation may be a big help for the individual investor. Investors who constantly try to outguess the market and chase winners may eventually find themselves swimming upstream. Staying the course and keeping a logical perspective may assist the investor with making the tricky portfolio decisions when necessary.  

We can now take a quick look at some historical stock price index data. Check Point Software Technologies Ltd. (CHKP) presently has a 6 month price index of 1.023603. The price index is calculated by dividing the current share price by the share price six months ago. A ratio over one indicates an increase in share price over the period. A ratio lower than one shows that the price has decreased over that time period. Looking at some alternate time periods, the 12 month price index is 1.169242 and the five year is 1.786331. Narrowing in a bit closer, the 3 month is 1.026052, and the 1 month is currently 1.104129.


Free Cash Flow Growth (FCF Growth) is the free cash flow of the current year minus the free cash flow from the previous year, divided by last year’s free cash flow. The FCF Yield of Check Point Software Technologies Ltd. (CHKP) is 0.069227. Free cash flow (FCF) is the cash produced by the company minus capital expenditure. This cash is what a company uses to meet its financial obligations, such as making payments on debt or to pay out dividends. The 5 Year FCF Yield of Check Point Software Technologies Ltd. (CHKP) is 0.054711. Experts say the higher the value, the better, as it means that the free cash flow is high, or the variability of free cash flow is low or both.

Most investors are more familiar with P/B or Price-to-book. This is just the inverted value.

Price-to-Book Ratio = Market Cap divided by Common Shareholders Equity,

Value Composite Three (VC3) is another adaptation of O’Shaughnessy’s value composite but here he combines the factors used in VC1 with buyback yield. This factor is interesting for investors who’re looking for stocks with the best value characteristics, but are indifferent to whether these companies pay a dividend.

VC3 is the combination of the following factors:

Price-to-Cash flow
Buyback Yield

As with the VC1 and VC2, companies are put into groups from 1 to 100 for each ratio and the individual scores are summed up. This total score is then put into groups again from 1 to 100. 1 is cheap, 100 is expensive.

The scorecard also displays variants of the VC3 where the score is calculated for the selected company compared to peer companies in the same industry, industry group or sector.

Please note that we use Book-to-Market instead of P/B since it allows a more accurate sorting compared to P/B. Stocks with a high B/M show up at the top of the list, stocks with negative B/M are at the bottom of the list. For the same reason we use Earnings-to-Price instead of Price-to-Earnings and Cash flow-to-price instead instead of Price-to-cash flow.

Also important is that we always make sure that companies with the same score get added to the same percentile. For stock universes where the number of stocks is less than 100, we make sure that the stocks are still allocated to percentiles from 0 to 100 instead of 0 to the total number of stocks. This is particularly relevant for the industry, industry group or sector variants where if additional filters are used, the number of stocks often drops below 100.

Check Point Software Technologies Ltd. (CHKP) has a VC3 of 35.

This multiple is similar to Earnings Yield, but here we use Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as Nominator). By doing this, we can compare companies with a different capital structure and capital expenditures. This way it gives a much better idea of the value of a company compared to the popular P/E ratio. As O’Shaughnessy explaines:

” Stocks that have very high debt levels often have low PE ratios, but this does not necessarily mean that they are cheap in relation to other securities. Stocks that are highly leveraged tend to have far more volatile PE ratios than those that are not. A stock’s PE ratio is greatly affected by debt levels and tax rates, whereas EBITDA/EV is not. To compare valuations on a level playing field, you need to account for how a company is financing itself and then compare how relatively cheap or expensive it is after accounting for all balance sheet items.” – James P. O’Shaugnessy in What works on Wall Street

You can think of it as the taking all the revenue and subtracting the costs that solely go into running the business. The downside of EBITDA is that it can be abused by companies declaring as “one-off” costs things that should really be considered normal costs. We use the EBITDA of the last 12 months.

Many individuals may have a tough time trying to figure out what actually drives financial markets. There are plenty of investing strategies and trading systems that individuals can use when trying to navigate the stock market. Sudden stock market moves can be mysterious, especially if the move goes against what professionals are expecting. When traders are just starting out, major market shifts can have the ability to wreak havoc if they are unprepared. Nobody wants to be on the losing end of a trade, but the reality is that it can happen at any time. Being prepared for the unknown isn’t easy, but it may be a good way to help ease the burden when markets get choppy.