Investors are often on the lookout for stocks that offer significant value, and Fortinet Inc (FTNT, Financial) may just be one of those opportunities. With a recent daily loss of -1.94% and a 3-month decline of -12.71%, coupled with an Earnings Per Share (EPS) of 1.45, the question arises: is Fortinet significantly undervalued? This article delves into a valuation analysis of Fortinet Inc (FTNT) to uncover its true market potential. Read on for an in-depth evaluation of this intriguing cybersecurity firm.
Company Introduction
Fortinet is a leading platform-based cybersecurity vendor, offering a wide array of products that cover network security, cloud security, zero-trust access, and security operations. The California-based company boasts a robust customer base of over 500,000 worldwide. Its business model primarily generates revenue through subscriptions and support services. Currently, Fortinet's stock price stands at $52.56, with a market capitalization of $39.80 billion, which presents an interesting comparison to its Fair Value (GF Value) of $81.99—suggesting that Fortinet may be significantly undervalued.
Summarize GF Value
The GF Value is a proprietary metric that represents the intrinsic value of a stock, calculated using historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. Fortinet (FTNT, Financial), with its current price of $52.56 per share and a market cap of $39.80 billion, is considered significantly undervalued according to the GF Value. This suggests that the long-term return of Fortinet's stock could potentially exceed its business growth.
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Financial Strength
When considering an investment, the financial strength of a company is paramount to avoid the risk of permanent capital loss. Fortinet's cash-to-debt ratio of 3.2 ranks in the upper half of its industry, indicating a solid financial foundation. GuruFocus awards Fortinet a financial strength rating of 7 out of 10, reflecting a fair balance sheet.
Profitability and Growth
Profitable companies with consistent track records are generally safer investments. Fortinet has maintained profitability for the past decade, with a notable operating margin of 23.39%, outperforming 91% of its industry peers. The company's robust profitability is reflected in its GuruFocus profitability rank of 9 out of 10. Moreover, Fortinet's growth metrics are impressive, with a 3-year average revenue growth rate surpassing 84% of companies in the Software industry, and an EBITDA growth rate of 37.7% ranking higher than 83.56% of its competitors.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) with its Weighted Average Cost of Capital (WACC) can provide insights into its value creation. Fortinet's ROIC of 23.34 is notably higher than its WACC of 11.61, indicating that the company is effectively generating value for its shareholders.
Conclusion
In summary, Fortinet (FTNT, Financial) appears to be significantly undervalued, with a strong financial condition, robust profitability, and superior growth rankings within the Software industry. For a more detailed look at Fortinet's financials over the past 30 years, interested parties can explore its financial data.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
