Fortinet (FTNT): Assessing Valuation After Legal Scrutiny and Strong Quarterly Results

Fortinet (FTNT) recently posted its third-quarter results, highlighting strong revenue growth and the unveiling of new AI-driven security tools. However, news of several class action lawsuits alleging misleading disclosures on its product upgrade cycle weighed on the stock.

See our latest analysis for Fortinet.

After several headline-making announcements and lawsuits, Fortinet’s share price has been anything but quiet. While strong quarterly results and new AI-focused products have underscored the company’s growth ambitions, ongoing class action suits and softer guidance have weighed on sentiment. The stock traded at $81.79 most recently. Although it rallied nearly 10% over the past 90 days, its year-to-date share price return is still down by over 13%. Despite that, long-term holders have seen a robust total shareholder return of more than 45% over three years and an impressive 253% across the past five years. This highlights that momentum may be taking a breather even as the longer-term growth story remains very much alive for committed investors.

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After such a turbulent year of headlines and volatility, the central question for investors is clear: does Fortinet offer hidden value below the surface, or is the market already factoring in all of its future growth potential?

Most Popular Narrative: 17.4% Undervalued

Fortinet’s most-followed narrative indicates a fair value significantly above the latest close of $81.79, suggesting there could be meaningful upside versus its current trading level. According to BlackJesus, the rationale behind this price target is rooted in exceptional profitability and the company’s unique operational discipline.

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.

Want to know what drives this bullish view? There is a game-changing profit forecast, grounded in superior margins and an uncommonly disciplined growth engine. Curious about the financial strengths that set this narrative apart? Discover which standout metrics underlie the undervalued call.

Result: Fair Value of $99.03 (UNDERVALUED)

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

However, risks remain, including Fortinet’s hardware-heavy product lineup and noted product security vulnerabilities. These factors could challenge its premium narrative if they persist.

Find out about the key risks to this Fortinet narrative.

Build Your Own Fortinet Narrative

If you see Fortinet’s story differently, or want to dig into the details yourself, you can shape your own view in just a few minutes. Do it your way

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

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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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