Should You Buy Fortinet Stock?

After an earnings report that beat analyst expectations, Fortinet (NASDAQ:FTNT), a cybersecurity company with a market capitalization of $55 billion, saw its stock drop 17% in extended trading. While the company’s third-quarter revenue guidance was slightly lower than predicted, the steep sell-off seems unwarranted.

However, given that Fortinet’s stock has been trading at a premium valuation, the lack of improved growth likely spooked investors. This raises the question: Is the stock a buy now that it has fallen to around $80 per share? We believe it is.

Our conclusion is based on a comprehensive analysis of Fortinet’s valuation, comparing its current state with its historical financial performance and operating metrics. This analysis, which focuses on key factors like Growth, Profitability, Financial Stability, and Downturn Resilience, indicates that the company has a very strong financial and operating position.

That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative — having outperformed the S&P 500 and generated returns exceeding 91% since its inception. Separately, see – What’s Happening With JOBY Stock?

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How Does Fortinet’s Valuation Look vs. The S&P 500?

Going by what you pay per dollar of sales or profit, FTNT stock looks expensive compared to the broader market.

• Fortinet has a price-to-sales (P/S) ratio of 9.6 vs. a figure of 3.0 for the S&P 500
• Additionally, the company’s price-to-free cash flow (P/FCF) ratio is 28.5 compared to 20.5 for S&P 500
• And, it has a price-to-earnings (P/E) ratio of 31.3 vs. the benchmark’s 22.5

How Have Fortinet’s Revenues Grown Over Recent Years?

Fortinet’s Revenues have seen notable growth over recent years.

• Fortinet has seen its top line grow at an average rate of 19.9% over the last 3 years (vs. an increase of 5.2% for S&P 500)
• Also, its quarterly revenues grew 14% to $1.63 Bil in the most recent quarter from $1.43 Bil a year ago (vs. 4.2% improvement for S&P 500)

How Profitable Is Fortinet?

Fortinet’s profit margins are considerably higher than most companies in the Trefis coverage universe.

• Fortinet’s Operating Income over the last four quarters was $1.9 Bil, which represents a considerably high Operating Margin of 31.5% (vs. 18.4% for S&P 500)
• Fortinet’s Operating Cash Flow (OCF) over this period was $2.3 Bil, pointing to a considerably high OCF Margin of 37.3% (vs. 19.8% for S&P 500)
• For the last four-quarter period, Fortinet’s Net Income was $1.9 Bil — indicating a considerably high Net Income Margin of 30.6% (vs. 12.2% for S&P 500)

Does Fortinet Look Financially Stable?

Fortinet’s balance sheet looks very strong.

• Fortinet’s Debt figure was $995 Mil at the end of the most recent quarter, while its market capitalization is $60 Bil. This implies a very strong Debt-to-Equity Ratio of 1.7% (vs. 23.6% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
• Cash (including cash equivalents) makes up $4.6 Bil of the $10.6 Bil in Total Assets for Fortinet.  This yields a very strong Cash-to-Assets Ratio of 45.9% (vs. 6.7% for S&P 500)

How Resilient Is FTNT Stock During A Downturn?

FTNT stock has been more resilient than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.

Inflation Shock (2022)

• FTNT stock fell 38.3% from a high of $80.28 on 17 July 2023 to $49.52 on 7 November 2023, vs. a peak-to-trough decline of 25.4% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 9 October 2024
• Since then, the stock has increased to a high of $114.57 on 19 February 2025 and currently trades at around $72

COVID-19 Pandemic (2020)

• FTNT stock fell 37.6% from a high of $24.27 on 6 February 2020 to $15.14 on 16 March 2020, vs. a peak-to-trough decline of 33.9% for the S&P 500
• The stock fully recovered to its pre-Crisis peak by 7 May 2020

Putting All The Pieces Together: What It Means For FTNT Stock

In summary, Fortinet’s performance across the parameters detailed above is as follows:

• Growth: Strong
• Profitability: Very Strong
• Financial Stability: Very Strong
• Downturn Resilience: Strong
• Overall: Very Strong

Fortinet has consistently performed well across key financial metrics. While its valuation multiple is currently higher than the broader market index, this is common for cybersecurity companies. For context, competitors like Palo Alto Networks, CrowdStrike, and Zscaler trade at 12x, 27x, and 17x revenue, respectively. Fortinet’s own average price-to-sales ratio over the last four years has been 12x.

We believe the recent decline in Fortinet’s stock presents a compelling opportunity for long-term investors. However, this assessment comes with risks. We acknowledge that our evaluation could be mistaken, and factors such as concerns over future growth prospects, intense competition from companies like Palo Alto Networks and Cisco, and broader market trends could impact the technology sector and cause the stock to fall another 20-30% from its current price.

That said, even though the market might be lowering the company’s valuation due to slowing revenue growth, we believe Fortinet’s strong fundamentals and operational performance suggest otherwise. Given the current valuation gap from its historical average, we project strong gains for investors with a three- to five-year investment horizon.

While FTNT stock may see higher levels, consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

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