Trading at 16.9 times earnings, less than half the industry average valuation — while offering industry leading margins and wide returns — Check Point Software Technologies Ltd. (NASDAQ:CHKP)´s shares look like a buy and hold case for me.
salesforce.com, inc. (NYSE:CRM) provides on-demand business services, mainly focused on Customer Relation Management (CRM) software that helps companies easily manage various critical business operations. “
By building its application on the public cloud, the company drives down costs by supporting a common hardware, networking and software platform, and passing some of that savings along to customers” (Morningstar).
As the industry leader, the company holds a strong brand name and a fair moating that has helped keep giant competitors like Oracle, SAP, and Microsoft lagged, and will most likely continue to do so. Furthermore, deriving most of its revenue from subscription fees, it holds a steady and predictable source of income and generator of free cash flow that will support future expansion initiatives.
By being the first mover in the Software-as-a-Service (SaaS) segment, it has procured many large customer accounts, which, coupled with continuous innovation and expansion, has resulted in an average annual revenue growth rate of almost 50% over the last 8 years. Going forward, salesforce.com, inc. (NYSE:CRM)’s features will not only help it retain existing clients, but also attract new ones looking to cut-down on IT expenses. Further growth opportunities are provided by the firm’s continuous product innovation, high cross-selling capabilities, acquisitions (as evidenced by the Rypple purchase last year) and international expansion.
The recent acquisition of ExactTarget has resulted in a substantial decrease in the firm’s stock price (but it will most likely not last long.) Although still valued more expensive than many of its peers, the current valuation opens an attractive entry point for investors. I’d say buy now and hold on to your shares: Analysts expect the firm to deliver an average annual EPS growth rate of about 28% over the next five years, surpassing the industry average by over 75%.
Bottom line
For a fundamental investor like me, a company that can keep competitors lagged while retaining its clients, and holds plenty of cash for expansion expenses, is quite certainly attractive. Above I have briefly looked into three companies that hold such features, and you should consider adding to your long-term portfolio.
The article Why These 3 Tech Companies Are a Good Investment Opportunity originally appeared on Fool.com and is written by Damian Illia.
Damian Illia has no position in any stocks mentioned. The Motley Fool recommends Check Point Software Technologies and Salesforce.com. The Motley Fool owns shares of Check Point Software Technologies and EMC.
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