Fortinet: First-tier in Cybersecurity
11/23/2016 10:00 am EST
Our latest recommendation is company that has been struggling lately, bringing the share price down, but seems to have a much clearer road to a strong recovery, asserts Stephen Leeb, growth stock expert and editor of The Complete Investor.
Our new pick is Fortinet (FTNT), which as a first-tier cybersecurity company is in the forefront of one of today’s most important areas.
Cybersecurity is critical in today’s world, and its importance will only continue to grow. Fortinet provides the industry’s largest set of integrated offerings, serving companies of all sizes.
The heart of most network security is the firewall, and on this score Fortinet ranks at the very top, offering first-in-class products at far lower costs per unit of information protected.
Fortinet has had its share of problems over the past few months. The recent fall in the stock stems from third-quarter revenue and profit growth below expectations. The shortfall in earnings was a bit more than 10 percent.
It was caused by a longer selling cycle for large companies that reflected financial constraints and to some extent by a reorganization of Fortinet’s sales force.
But while the internal sales force issues have taken somewhat longer to resolve than expected, over the longer term the reorganization should provide a boost to growth.
In the next several years we expect the superiority of Fortinet’s products will foster continued gains in its market share of its rapidly growing industry.
Over the past five years, the company’s revenue and profit growth has averaged about 20 percent, a rate we expect can continue, or be surpassed, in the next five.
The balance sheet is exceptional with no debt and with cash that amounts to about 18 percent of the market capitalization.
Free cash flow yield based on estimated 2017 results is above 7 percent. The cash is being used to make strategic acquisitions and repurchase shares.
We expect cybersecurity will continue to be one of the fastest-growing industries and that Fortinet will grow even faster than the industry at large.
By Stephen Leeb, Editor of The Complete Investor