Is Now The Time To Put Fortinet (NASDAQ:FTNT) On Your Watchlist?

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

In contrast to all that, many investors prefer to focus on companies like Fortinet (NASDAQ:FTNT), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

See our latest analysis for Fortinet

Fortinet's Earnings Per Share Are Growing

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. That means EPS growth is considered a real positive by most successful long-term investors. To the delight of shareholders, Fortinet has achieved impressive annual EPS growth of 39%, compound, over the last three years. That sort of growth rarely ever lasts long, but it is well worth paying attention to when it happens.

It's often helpful to take a look at earnings before interest and tax (EBIT) margins, as well as revenue growth, to get another take on the quality of the company's growth. The music to the ears of Fortinet shareholders is that EBIT margins have grown from 20% to 23% in the last 12 months and revenues are on an upwards trend as well. Ticking those two boxes is a good sign of growth, in our book.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Fortinet's future EPS 100% free.

Are Fortinet Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. That's because insider buying often indicates that those closest to the company have confidence that the share price will perform well. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

We haven't seen any insiders selling Fortinet shares, in the last year. With that in mind, it's heartening that William Neukom, the Lead Independent Director of the company, paid US$29k for shares at around US$67.40 each. Decent buying like this could be a sign for shareholders here; management sees the company as undervalued.

The good news, alongside the insider buying, for Fortinet bulls is that insiders (collectively) have a meaningful investment in the stock. We note that their impressive stake in the company is worth US$6.3b. That equates to 16% of the company, making insiders powerful and aligned with other shareholders. Looking very optimistic for investors.

Is Fortinet Worth Keeping An Eye On?

Fortinet's earnings per share growth have been climbing higher at an appreciable rate. The icing on the cake is that insiders own a large chunk of the company and one has even been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Fortinet deserves timely attention. Now, you could try to make up your mind on Fortinet by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

The good news is that Fortinet is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.