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How Fortinet Is Increasing Shareholder Value

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Share buyback trend

In the last five years, Fortinet (FTNT) has continued to boost shareholder value with its regular share repurchase program. During the period, the company bought back shares worth nearly $695 million, at an average of nearly $139 million worth of shares per year. Strong free cash flow coupled with low leverage has allowed the company to keep enhancing shareholder value through such regular buybacks while moving ahead.

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The graph above shows the share repurchase trend of Fortinet in the last five years. The company maintained a decent buyback trend every year. The company exited fiscal 2017 with share repurchases worth $446 million, whereas in fiscal 4Q17, it bought back nearly $322 million worth of shares as compared with just $36 million in fiscal 4Q16.

Share buybacks

In 2017, the management raised its share repurchase program by $700 million to $1.0 billion, which is quite encouraging for investors. The company has generated a healthy free cash flow in the last five years driven by strong revenue growth and huge contract wins. During the period, the security service provider maintained an average free cash flow of nearly $256 million every year. Moreover, in fiscal 2017, the free cash flow for the company stood at nearly $459 million against $279 million in 2016. In the last five years, the company has maintained free cash flows above its funds used for share repurchases, which suggests that Fortinet never used debt as a source to finance its buyback goals.

Citrix (CTXS) and International Business Machines (IBM) bought back shares worth $1.2 billion and $0.7 billion, respectively, in 2017.

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