FORTINET INC (NASDAQ:FTNT) – A Cybersecurity Leader with Strong Quality Metrics

FORTINET INC (NASDAQ:FTNT) stands out as a compelling candidate for quality investors, particularly those focused on long-term holdings in high-performing businesses. The company, a leader in cybersecurity solutions, meets several key criteria for quality investing, including strong profitability, efficient capital allocation, and consistent growth.

Key Strengths of FTNT for Quality Investors

• High Return on Invested Capital (ROIC): FTNT boasts an exceptional ROIC of 315.20% (excluding cash and goodwill), far exceeding the 15% threshold typically sought by quality investors. This indicates the company generates substantial profits relative to its invested capital.
• Strong Revenue and EBIT Growth: Over the past five years, FTNT has delivered 13.49% annual revenue growth and an impressive 39.22% EBIT growth, demonstrating both top-line expansion and improving profitability.
• Low Debt Burden: With a Debt-to-Free Cash Flow ratio of 0.48, FTNT could theoretically repay all its debt in less than six months using its current cash flow—a sign of financial strength.
• High Profit Quality: The company converts 164.41% of its net income into free cash flow, well above the 75% benchmark, indicating earnings are backed by real cash generation rather than accounting adjustments.

Fundamental Analysis Highlights

FTNT receives a 7/10 in our fundamental assessment, with standout ratings in profitability (9/10) and financial health (8/10). Key takeaways include:

• Profit Margins: Operating margin of 31.67% and net margin of 30.60% rank in the top 5% of the software industry.
• Growth Outlook: Analysts expect 13.49% annual revenue growth over the next three years, suggesting sustained expansion.
• Valuation: While not cheap (P/E of 41.44), the premium may be justified given FTNT’s industry-leading margins and growth trajectory.

Our Caviar Cruise screener identifies more quality stocks like FTNT, updated daily. For a deeper dive, review the full FTNT fundamental report.

Disclaimer

This is not investing advice. Always conduct your own research before making investment decisions.