Sunnyvale, California-based Fortinet, Inc. (FTNT) provides comprehensive, integrated, and automated cybersecurity solutions in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company offers FortiGate hardware and software licenses, FortiSwitch product family, FortiAP product family, FortiAnalyzer product family, and FortiManager product family.

FTNT sells its security solutions to channel partners and customers in telecommunications, government, technology, financial services, education, manufacturing, and healthcare industries.

The company delivered solid revenue and billings growth in the second quarter, driven by transactions worth more than one million dollars, representing a more than 50% year-over-year increase. Furthermore, large enterprise companies continue to favor FTNT’s industry-leading cost for performance advantage and integrated platform strategy.

Ken Xie, FTNT’s Founder, Chairman, and Chief Executive Officer, said, “Fortinet’s market share gains are being driven by the convergence of networking and security and an accelerating focus on vendor consolidation with our Core Platform and Platform Extension solutions designed to secure our customers’ entire infrastructure from the data center to the cloud.”

On August 3, FTNT introduced FortiGate 4800F, the industry’s fastest compact hyper-scale firewall for hyper-scale data centers and 5G networks, with 2.4 Tbps capacity and varied 400GbE, 200GbE, and 50GbE ports. It enables enterprises and MNOs to concurrently run more applications while reducing their physical footprint and effectively securing their networks.

On July 26, FTNT announced FortiCNP, a new built-in-the-cloud protection offering, available now on Amazon Web Services (AWS). The new cybersecurity solution correlates security findings across an organization’s cloud security operations, accelerates risk management, and delivers near-real-time threat protection with zero-permission malware detection capabilities.

These new, advanced offerings are expected to extend the company’s market reach and boost its growth and profitability.

FTNT has declined 22.1% in price year-to-date to close the last trading session at $51.93. However, Wall Street analysts expect the stock to hit $73.38 in the near term, indicating a potential upside of 41.3%.

Here is what could influence FTNT’s performance in the upcoming months:

Robust Financials

FTNT’s revenue increased 28.6% year-over-year to $1.03 billion, and its gross profit grew 26.9% year-over-year to $779.30 million in the fiscal 2022 second quarter ended June 30, 2022. The company’s non-GAAP operating income amounted to $255.40 million, up 25.6% year-over-year.

Furthermore, the company’s non-GAAP net income and net income per share attributable to FTNT came in at $194.10 million and $0.24, registering increases of 22.3% and 26.3% from the prior-year period, respectively.

Favorable Analyst Estimates

Analysts expect FTNT’s revenue for the fiscal 2022 third quarter (ending September 2022) to come in at $1.12 billion, indicating an increase of 29.7% from the same period in 2021. The $0.27 consensus EPS estimate for the ongoing quarter represents a 38.2% year-over-year increase. The company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

In addition, FTNT’s revenue and EPS for the fiscal year 2022 (ending December 2022) are expected to rise 31.1% and 31.9% year-over-year, respectively. Also, analysts expect the company’s revenue and EPS for the next year to grow 21.2% and 23.1% year-over-year, respectively.

High Profitability

FTNT’s trailing-12-month gross profit margin of 75.26% is 49.7% higher than the 50.29% industry average. Its trailing-12-month EBITDA margin of 21.54% is 64.8% higher than the 13.1% industry average. Likewise, the stock’s trailing-12-month net income margin of 17.66% is 312.2% higher than the industry average of 4.28%.

Furthermore, FTNT’s trailing-12-month ROCE, ROTC, and ROTA of 205.08%, 33.35%, and 12.73% are higher than the industry averages of 6.98%, 3.98%, and 2.76%, respectively.

Power Ratings Show Promise

FTNT has an overall B rating, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree. 

FTNT has a grade of A for Quality, which is in sync with its higher-than-industry profitability ratios. In addition, the stock has a grade of B for Sentiment, consistent with its revenue and earnings growth estimates.

FTNT is ranked #2 out of 29 stocks in the Software-Security industry.

Beyond what I have stated above, we have also given FTNT grades for Momentum, Value, Growth, and Stability. Get access to all the FTNT ratings here.

Bottom Line

FTNT reported strong earnings, revenue, and billings growth in the fiscal 2022 second quarter. Moreover, the cybersecurity firm is well-positioned to capitalize on the industry tailwinds based on its new, advanced offerings.

Given the company’s strong financials, higher-than-industry profitability, and solid revenue and earnings growth estimates, we think it could be wise to invest in the stock now.

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

FTNT has an overall POWR Rating of B. One could also check out these other stocks within the Software-Security industry with a B (Buy) rating: Check Point Software Technologies Ltd. (CHKP), NortonLifeLock Inc. (NLOK), and Radware Ltd. (RDWR).

FTNT shares were trading at $52.36 per share on Thursday afternoon, up $0.43 (+0.83%). Year-to-date, FTNT has declined -27.16%, versus a -9.26% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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