Assessing Fortinet (FTNT) Valuation After Recent Share Price Weakness And Profitability Strength

Why Fortinet is on investors’ radar today

Fortinet (FTNT) has drawn fresh attention after recent share price moves, with the stock roughly flat over the past day but showing declines over the past week, month and past 3 months.

See our latest analysis for Fortinet.

At a share price of US$77.94, Fortinet’s recent 7 day and 30 day share price declines sit against a flat year to date share price return. Its 1 year total shareholder return of an 18.75% decline contrasts with stronger 3 and 5 year total shareholder returns, hinting that momentum has faded after earlier gains and that recent moves may reflect investors reassessing growth potential and risk.

If Fortinet’s recent swings have you reassessing your watchlist, it could be a good moment to check out other cybersecurity and software names via high growth tech and AI stocks.

With Fortinet trading at US$77.94 and some measures suggesting a possible discount to estimated value, the key question is whether recent weakness has left the stock undervalued or whether the market already reflects its future prospects.

Most Popular Narrative: 21.3% Undervalued

Fortinet’s fair value in the narrative sits at US$99.03 against a last close of US$77.94, which sets up a clear valuation gap for investors to consider.

Fortinet is a model of profitability and operational efficiency. For its full fiscal year 2024, the company achieved a GAAP operating margin of 30.3% and a net profit margin of 29.3%. Its trailing-twelve-month (TTM) profit margin stands at an impressive 30.6%. This level of profitability is a direct result of its organic growth model, which avoids the heavy non-cash charges associated with large acquisitions.

Read the complete narrative.

Curious how this narrative gets to a premium of more than one fifth over today’s price? Profit margins, growth assumptions and a future earnings multiple all quietly shape that US$99.03 figure.

Result: Fair Value of $99.03 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this hinges on Fortinet avoiding further product security issues and effectively managing any pressure on its hardware-centric model, which could otherwise squeeze those high margins.

Find out about the key risks to this Fortinet narrative.

Build Your Own Fortinet Narrative

If this view does not quite fit how you see Fortinet, you can test the numbers yourself and shape a fresh story in minutes, Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Fortinet.

Looking for more investment ideas?

If Fortinet has you rethinking your next move, do not stop here. The right shortlist of ideas can help you decide where to focus your time.

• Spot potential value by scanning these 880 undervalued stocks based on cash flows that may offer pricing that does not fully reflect their underlying cash flows.
• Back future focused themes by tracking these 25 AI penny stocks that are tied to artificial intelligence across different parts of the market.
• Strengthen your income watchlist by screening these 14 dividend stocks with yields > 3% that currently offer yields above 3%.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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