February’s job report revealed an unexpectedly high number of new jobs created, increasing the likelihood of the Federal Reserve raising interest rates higher and for a more extended period.
Despite the market turmoil, I think Fortinet, Inc. (FTNT), Teradata Corporation (TDC), and Box, Inc. (BOX) are well-poised to deliver sustainable returns.
Although the Federal Reserve has been trying to curb the economy and reduce inflation, the most recent employment report shows that the labor market remains tight, and job growth is stronger than anticipated. In February, nonfarm payrolls rose by 311,000, above the 225,000 Dow Jones estimate.
Moreover, in remarks on Capitol Hill this week, Fed Chairman Jerome Powell called the jobs market “extremely tight” and cautioned that recent data showing resurgent inflation pressures could push interest rate hikes higher than expected.
Furthermore, the recent collapse of Silicon Valley Bank has caused concerns among investors. Markets then pushed back projections for eventual rate cuts, with many forecasters expecting the first one sometime in 2024.
However, despite the volatility, the tech industry’s long-term prospects look favorable. The software market is expected to generate revenues of $650.70 billion in 2023, driven by the growing demand for Software as a Service (SaaS) solutions due to the rise in remote and hybrid work cultures.
So, fundamentally solid stocks, FTNT, TDC, and BOX could be worth buying now.
Fortinet, Inc. (FTNT)
FTNT offers comprehensive, integrated, and automated cybersecurity solutions internationally. It sells FortiGate hardware and software licenses, which enable a range of networking and security features. It also provides security subscriptions, technical support, and training services.
On March 1, 2023, FTNT announced new and enhanced products and services for operational technology (OT) environments as an expansion of the Fortinet Security Fabric for OT. FTNT enables organizations to build a platform of integrated solutions to effectively mitigate cyber risk across OT and IT environments.
John Maddison, EVP of Products and CMO of the company, said, “The Fortinet Security Fabric for OT is specifically designed for operational technology, and we’re pleased to introduce additional cyber-physical security capabilities to protect these environments.”
In terms of the trailing-12-month EBIT margin, FTNT’s 21.85% is 271.5% higher than the 5.88% industry average. Its 19.41% trailing-12-month net income margin is 565.3% higher than the 2.92% industry average. Its 24.02% trailing-12-month levered FCF margin is 255.8% higher than the industry average of 6.75%.
During the fiscal fourth quarter that ended December 31, 2022, FTNT’s total revenue increased 33.1% year-over-year to $1.28 billion. Its non-GAAP operating income rose 52% from the prior-year quarter to $417.60 million.
Non-GAAP net income attributable to FTNT and non-GAAP net income per share attributable to FTNT came in at $349.70 million and $0.44, up 69.9% and 76% from the prior-year quarter, respectively.
Street expects FTNT’s revenue for the fiscal first quarter ending March 2023 to come in at $1.20 billion, representing a 25.9% rise year-over-year. Its EPS is expected to increase 52.9% year-over-year to $0.29. The company has an impressive earning history, as it has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 21.2% year-to-date to close the last trading session at $59.27.
FTNT’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Quality and a B for Growth and Sentiment. The stock is ranked #3 among 22 stocks in the Software – Security industry.
Click here to see the other ratings of FTNT for Value, Momentum, and Stability.
Teradata Corporation (TDC)
TDC provides a connected multi-cloud data platform for enterprise analytics to various industries, including automotive, energy and natural resources, financial services, government, healthcare, manufacturing, retail, and telco.
On March 8, TDC announced the integration and general availability of TDC VantageCloud, the complete cloud analytics and data platform, with Microsoft Azure Machine Learning (Azure ML).
VantageCloud offers scalability, openness, and industry-leading analytics through ClearScape Analytics™, while Azure ML simplifies and accelerates the ML lifecycle. The company is constantly enhancing its capabilities to serve customers better.
TDC’s 24.13% trailing-12-month levered FCF margin is 258.3% higher than the 6.73% industry average. In terms of the trailing-12-month ROTC, the stock’s 7.54% is 134.3% higher than the industry average of 3.22%. Its trailing-12-month gross profit margin of 60.67% is 24.1% higher than the 48.89% industry average.
During the fiscal fourth quarter that ended December 31, 2022, TDC’s public cloud annual recurring revenue rose 76.7% year-over-year to $357 million. Its cash provided by operating activities grew 35.8% year-over-year to $129 million, while free cash flow increased 41.2% from the prior-year quarter to $120 million. Moreover, the company reported a non-GAAP EPS of $0.35.
Analysts expect TDC’s revenue for the fiscal year 2023 to rise 1.5% year-over-year to $1.82 billion. Its EPS is expected to grow 20.4% year-over-year to $1.97 in the current year. The company also surpassed the consensus EPS estimates in each of the trailing four quarters, which is remarkable.
TDC’s shares have gained 14.3% over the past six months to close the last trading session at $37.01.
It is no surprise that TDC has an overall rating of B, equating to a Buy in our POWR Ratings system.
TDC has an A grade in Value and Quality. Within the 81-stock Technology – Services industry, TDC is ranked #10.
In addition to the POWR Rating grades just highlighted, you can see TDC’s growth, Momentum, Stability, and Sentiment ratings here.
Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device.
The company’s Software-as-a-Service platform allows users to collaborate on content, automate content-driven business processes, develop custom applications, and implement data protection, security, and compliance features.
BOX’s 30.33% trailing-12-month levered FCF margin is 349.4% higher than the 6.75% industry average. In terms of the trailing-12-month gross profit margin, the stock’s 74.51% is 52.3% higher than the 48.94% industry average. Its 0.76x trailing-12-month asset turnover ratio is 25.4% higher than the industry average of 0.61x.
BOX’s revenue increased 9.9% year-over-year to $256.48 million in the fiscal fourth quarter that ended January 31, 2023. The company’s non-GAAP gross profit increased 14.9% year-over-year to $201.26 million, while non-GAAP operating income increased 37.3% year-over-year to $66.56 million.
The company’s non-GAAP net income attributable to common stockholders rose 52.7% year-over-year to $56.29 million, and non-GAAP net EPS attributable to common stockholders increased 54.2% year-over-year to $0.37.
BOX’s EPS and revenue for the fiscal first quarter ending April 2023 are expected to increase 18.4% and 4.6% year-over-year to $0.27 and $249.29 million, respectively. Also, it has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 5.6% over the past nine months to close the last trading session at $25.48.
BOX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and Quality and a B for Value. It is ranked #5 in the Technology – Services industry.
To access the additional ratings of BOX for Momentum, Stability, and Sentiment, click here.
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FTNT shares were unchanged in premarket trading Tuesday. Year-to-date, FTNT has gained 21.23%, versus a 0.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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