Shares of Fortinet, Inc. (FTNT) have surged 65.9% over the past six months to close its last trading session at $80.24. With a 35% increase in product revenue in the fiscal first quarter, FTNT, recognized as a prominent player in the cybersecurity industry, has achieved significant market share growth.

FTNT's integrated FortiOS and custom ASIC technologies are swiftly gaining recognition among companies for their ability to boost security efficacy and efficiency while reducing the total cost of ownership. Notably, the company achieved a milestone with service revenue surging over 30% in the fiscal first quarter, a feat unseen in six years.

Meanwhile, on June 7, FTNT reported that 11 new Managed Security Service Providers (MSSPs) have adopted Fortinet Secure SD-WAN. This move aims to drive better business outcomes and experiences for its customers while also helping FTNT stay competitive in the rapidly evolving networking market.  

Furthermore, on April 18, the company became a member of the Joint Cyber Defense Collaborative (JCDC). This move signifies FTNT's commitment to strengthening the security posture and cybersecurity resilience of the United States.

Such collaborative efforts are expected to help the company build systemic resilience by coordinating incident response and proactively addressing vulnerabilities and other cyber risks before exploitation occurs.

Here is what could shape FTNT’s performance in the near term:

Robust Financials

For the first quarter (ended March 31, 2023), FTNT’s total revenue increased 32.2% year-over-year to $1.26 billion. Its non-GAAP operating income rose 58.9% from the year-ago value to $334 million. Moreover, non-GAAP net income attributable to FTNT rose 73.9% from the prior year’s period to $269.70 million.

In addition, non-GAAP net income per share attributable to FTNT came in at $0.34, reflecting a 78.9% year-over-year improvement. As of March 31, 2023, the company’s cash and cash equivalents stood at $2.30 billion, compared to $1.68 billion as of December 31, 2022.

Solid Historical Growth

Over the past three years, FTNT’s revenue grew at a 27.7% CAGR. The company’s EBITDA and net income rose at CAGRs of 39.1% and 36.8%, respectively. Moreover, the company’s EPS and total assets increased at CAGRs of 40.7% and 28.7%, respectively, during the same period.

Favorable Analyst Estimates

Analysts expect FTNT’s revenue to increase 23.8% year-over-year to $5.47 billion for the fiscal year ending December 2023. The company’s EPS for the ongoing year is expected to rise 23.3% from the previous year to $1.47. Moreover, the company topped its consensus EPS estimates in all four trailing quarters, which is impressive.

Furthermore, FTNT’s revenue and EPS for the next fiscal year (ending December 2024) are expected to grow 19.1% and 18.2% year-over-year to $6.51 billion and $1.73, respectively.

High Profitability

FTNT’s trailing-12-month gross profit margin of 75.90% is 56% higher than the 48.66% industry average. Its trailing-12-month EBITDA of 25.26% is 195% higher than the industry average of 8.57%. In addition, the stock’s trailing-12-month net income margin of 20.46% compares to the industry average of 2.01%.

POWR Ratings Show Promise

FTNT’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. FTNT has an A grade for Quality, in sync with its higher-than-industry profitability. Also, the stock has a B grade for Growth, consistent with its robust growth record.

FTNT has topped the 21-stock Software - Security industry. Click here to access FTNT’s Value, Momentum, Stability, and Sentiment ratings.

View all the top stocks in the Software – Security industry here.

Bottom Line

FTNT continues its upward trajectory, securing a leading position as a product revenue company in the cybersecurity industry while gaining valuable market share. The company's competitive edge is being further fortified by the widespread adoption of its integrated technologies and strategic collaborations in the rapidly evolving networking market.

Considering the company’s strong financials, profitability, positive analyst sentiment, and impressive growth record, FTNT could be a solid buy now.

How Does Fortinet, Inc. (FTNT) Stack Up Against Its Peers?

While FTNT has an overall rating of B, equating to Buy, one could also check out other stocks within the Software - Security industry: Check Point Software Technologies Ltd. (CHKP), Trend Micro Incorporated (TMICY), and Varonis Systems, Inc. (VRNS).

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FTNT shares were trading at $79.10 per share on Wednesday morning, down $1.14 (-1.42%). Year-to-date, FTNT has gained 61.79%, versus a 20.10% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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