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No. of Recommendations: 3
Am I missing something?

TTM is 3.49. They will do 800m in buybacks next year. And they got the money to do something acquisition-wise. You have to trust them to use the ex-cash number and I do. Plus, as you know incremental revenue on a no CapEx business is essentially pure profit, so I don't worry much about the growth rates not being great.

As you may know, I don't do estimates on companies like this (how? I have no idea how this business will go and am not an expert on the product or area; that whole discussion and blades and the like isn't something I can be smart on). I mainly look at what other people do and rely on that.

The tone is better:

*accelerating successive quarterly revenue growth
*higher buybacks set - and they buy consistently and logically, not haphazardly
*expense hit from higher headcount (this doesn't strike me as an issue)
*little to nothing news on acquisitions (cause at least they aren't blowing their money)
*options at 1% a year
*not looking to trade it so my horizon extends beyond next 4 quarters

It is just a 'good business at a fair price ex-cash' idea. Nothing special. As you know, I've owned it off and on for a while now. My position size is also influenced by what I'm not seeing in other areas.

my original thesis - not much changed but valuation is surely up

THESIS 9-15-10, $34.21, 7470-5329, 18.6-13.3, 16.1-11.5, 4.5, fcy-9.4%, ni-402, cf-463, cex=4
CHKP is combination asset play and fast grower. Based on VL’s 2011 estimate of $2.20 (12% growth), the stock trades for 15.5x earnings but without the cash balance of $10 the PE drops to 11x. The stock has always traded with little respect (besides 2000 and 2001) with a 5 year PE ratio of 19.8 to 13.6 ($43.56 to 29.92, or a mid-point of $36.74 so you’d have to base further appreciation on the higher point which gets you 27% higher from here. Positive and negatives are listed below. Like most of these software companies, you are buying based on the model, not based on your in-depth knowledge of the business prospects of the company. That said, these shares strike me as cheap, and while competition is brutal CHKP has thrived. I have assigned xx% to the position and think that is about right for now, though you could move this up to xx% with any significant drop. The price, by and large, has been relatively stable though the usual 50% moves are common.

Positives
Cash is over $10 a share
Bot 1.3b in stock past 5 years
Huge FCF generator
Accelerating growth in past several years
Very high ROIC and margins
High Insider Ownership

Negatives
Impossible for me to tell competitive position or market environment
Near 52 week high
Isreal law restricts what they can do with cash – maybe changing
Primary focus is on acquisitions
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