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Bull Of The Day: Fortinet (FTNT)

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Fortinet (FTNT - Free Report) is a Zacks Rank #1 (Strong Buy) and it sports a F for Value and an A for Growth.  I love to see that sort of growth divergence where we have a weak value score and a strong growth score.  As a growth investor, that tells me right away that I am on the right path. This security company posted a good beat in early November.  Let’s explore more about this company in this Bull of The Day article.

Description

Fortinet, Inc. provides cybersecurity solutions. It offers FortiGate hardware and software licenses that provide various security and networking functions, including firewall, intrusion prevention, anti-malware, virtual private network, application control, web filtering, anti-spam, and wide area network acceleration. It sells its security solutions to channel partners and directly to various customers in telecommunications, technology, government, financial services, education, retail, manufacturing, and healthcare industries. It has strategic alliance with Linksys. Fortinet, Inc. was incorporated in 2000 and is headquartered in Sunnyvale, California.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

For FTNT, I see four straight beats of the Zacks Consensus Estimate.  That is great to see, but by itself that is not enough to make the company a Zacks Rank #1 (Strong Buy).

The average positive earnings surprise over the course of the last year works out to be 14.5%.

Earnings Estimates Revisions

The Zacks Rank tells us which stocks are seeing earnings estimates move higher. 

Over the last 60 days, earning estimates have moved up for FTNT.

This quarter has moved up from $0.35 to $0.39.

Next quarter has increased from $0.27 to $0.28.

The full fiscal year 2022 has increased from $1.05 to $1.14.

Next fiscal year has seen the estimate move from $1.29 to $1.39.

Positive movement in earnings stock is a Zacks Rank #1 (Strong Buy).

Valuation

The valuation for this name isn’t low, but there is solid growth.  I see a forward PE of 46x which is very high, but the company is coming off a quarter that saw topline growth of more than 32%.  The price to book is an NA as that number works out to be a negative number.  A software name like this is an asset slim business so when the number does go positive it would not be surprising to see a double digit price to book multiple. Price to sales comes in a 10x and that is a big number, but the growth is there to support it.  I see margins increasing in the most recent quarter and with revenue growth expected to be 32% this year that should continue to drive earnings higher.


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