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Here's Why You Should Add Fortinet (FTNT) to Your Portfolio

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Fortinet Inc. (FTNT - Free Report) has been an investor favorite for quite some time as evident from its price momentum. The stock has gained 45.9% in the past year, substantially outperforming the 32.3% rally of the industry it belongs to.

Let’s delve deeper and take a look at the key aspects aiding the company’s performance.

The stock has a stellar record of positive earnings surprises, having beaten the Zacks Consensus Estimate in all the last four quarters, with an average positive surprise of 20.1%.

In the last reported fourth-quarter 2017 results, the company’s non-GAAP earnings of 32 cents per share beat the Zacks Consensus Estimate of 29 cents and also increased from the year-ago figure of 30 cents per share.

A large number of deal wins and customer additions  aided top-line growth in the quarter that increased 14.8% year over year to reach $416.7 million, beating the Zacks Consensus Estimate of $409 million.

We believe Fortinet’s initiative to change its business model to a subscription-based service provider will drive the company’s bottom line in the long run. Subscription-based service is a high gross margin business (approximately 80%) compared with the hardware-centric model.

Notably, the company generates more than 50% of the total revenues from these services, which  led to a 70 bps expansion in 2017 gross margin. We anticipate this strategy to continue to drive the company’s bottom-line performance.

Notably, per a recent report by Markets and Markets, the cyber security market is expected to witness CAGR of 11% in the 2017-2022 period. These predictions bode well for Fortinet, which has a diversified product portfolio for PCs, mobile and enterprise security. Furthermore, Fortinet has partnered with Exodus Intelligence, Cisco ACI, NTT Communications and VMware NSX Partner Ecosystem to provide best-in-class cyber security solutions.

We believe all these positives make this Zacks Rank #2 (Buy) stock a must have in investors' portfolio.

Some other top-ranked stocks in the broader technology sector are NVIDIA Corporation (NVDA - Free Report) , Micron Technology, Inc. (MU - Free Report) and Western Digital Corporation (WDC - Free Report) , all sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA, Micron and Western Digital have long-term expected EPS growth rates of 10.3%, 10% and 19%, respectively.

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