Is Fortinet Fairly Priced After Latest AI Security Platform Launch?

If you’re weighing what to do with your Fortinet shares right now, you’re not alone. This is one of those stocks that gets investors talking, whether you’re looking back at explosive gains over the last five years or watching the zig-zags of recent weeks play out in real time. In the past year, Fortinet has inched up just 1.8%, but its stunning 221.5% climb over the last five years makes anyone wonder what’s next.

In the short term, the ride has been a bit more turbulent. Last week, Fortinet’s stock slipped 3.3%. Zoom out and you’ll see a modest 3.2% gain over the last month, but the year-to-date return is still off by nearly 12%. With shifting global cybersecurity needs and market jitters around growth stocks, recent movements may reflect investors recalibrating their risk and reward expectations. Even so, with its current valuation score of 4 out of 6, Fortinet checks the box as undervalued in several key ways, making it a name worth a closer look.

But if you’re just looking at the typical valuation metrics, you might be missing the heart of the story. Let’s dig into how the standard valuation approaches assess Fortinet right now, and stick around for a more practical take at the end that just might change how you think about what “undervalued” really means.

Why Fortinet is lagging behind its peers

Approach 1: Fortinet Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model works by taking Fortinet's expected future cash flows, forecasting them over coming years, and discounting everything back to what those future dollars are worth today. This method is designed to answer the question: how much is Fortinet really worth if we factor in its cash-generating power over time?

Right now, Fortinet is generating Free Cash Flow of $2.05 billion. Analysts estimate this cash flow will grow steadily, reaching $3.54 billion by the end of 2029. It is worth noting that while analyst forecasts typically only cover the next five years, Simply Wall St has extrapolated projections out a full decade to complete the model.

Crunching these numbers leads to a calculated "fair value" for Fortinet of $85.17 per share. Compared to the current trading price, the DCF model indicates the stock is about 1.9% undervalued. This suggests the shares are trading very close to their intrinsic value, reflecting most of what you would expect based on projected future performance.

Result: ABOUT RIGHT

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Fortinet.

Simply Wall St performs a valuation analysis on every stock in the world every day (check out Fortinet's valuation analysis). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes.

Approach 2: Fortinet Price vs Earnings

For profitable companies like Fortinet, the Price-to-Earnings (PE) ratio is often the go-to valuation metric. It gives investors a quick sense of how much they're paying for each dollar of earnings, which is highly relevant for businesses generating healthy profits. This ratio is particularly useful because it allows you to compare valuations across companies of different sizes and sectors on a common basis.

Of course, a “normal” or “fair” PE ratio isn’t one-size-fits-all. Growth expectations, risk levels, and a company’s overall financial health all shape what is considered reasonable. High-growth companies can often justify higher PE multiples, while riskier or slower-growing firms usually trade lower.

Fortinet’s current PE sits at 33x. Compared to the Software industry average of 34.9x and a peer average of 72x, Fortinet looks modestly valued on the surface. However, relying just on these broad benchmarks can be misleading, since not all companies have the same growth, profitability, or risk profile.

This is where Simply Wall St’s “Fair Ratio” comes in. It incorporates factors like Fortinet’s projected earnings growth, strong profit margins, market capitalization, and specific risk profile, not just a blanket industry or peer number. Fortinet’s Fair Ratio is calculated at 35.8x, only slightly higher than its current PE. This close alignment signals that the market is pricing the stock almost directly in line with its fundamentals, making it neither obviously cheap nor expensive on this measure.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Fortinet Narrative

Earlier, we mentioned there is an even better way to understand valuation. Let's introduce you to Narratives, a dynamic feature on Simply Wall St that goes beyond numbers and helps investors tell the story behind their own fair value estimates and forecasts for a company.

A Narrative is a clear, written perspective that connects your view of Fortinet’s business, its future earnings and revenue, and your sense of what the shares should really be worth. Narratives let you express and justify your expectations for factors like growth rates, margins, and risk, tying a company's story directly to a financial forecast, which then leads to a personalized fair value.

You do not need to be an expert or build a spreadsheet to use them. Narratives are accessible and can be easily contributed on Simply Wall St’s Community page, where millions of investors share their outlooks.

They empower you to compare your own fair value against the current price, quickly see if others agree with your view, and update your thinking as new news, earnings reports, or developments hit the market. This helps your investment thesis stay fresh and informed.

For example, some investors’ Fortinet Narratives predict a fair value as high as $99 per share based on strong margins and operational discipline, while others see just $67 due to concerns about growth risks and industry headwinds.

Do you think there's more to the story for Fortinet? Create your own Narrative to let the Community know!

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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