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What Are Fortinet’s Valuation Multiples?

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Updated

Forward PE ratio

Fortinet (FTNT) is expected to grow sales by double-digit rates over the next few years. The company’s bottom line is also expected to expand driven by Fortinet’s operating leverage multiple of 1.18x this year and 1.40x in 2020. But what do Fortinet’s multiples suggest? Is the stock overvalued at current prices?

Fortinet (FTNT) has a forward PE ratio of 39.09x for 2019. The ratio might seem high given the company’s earnings growth of 13%. Fortinet does not pay a dividend, and the stock might seem overvalued even after losing 50% in value considering this metric.

Peers Palo Alto Networks (PANW), Check Point (CHKP), FireEye (FEYE), and Proof Point (PFPT) are trading at forward 2019 PE ratios of 37.8x, 18.2x, 51.16x, and 56.48x, respectively.

Fortinet is valued at 7.5x sales, while PANW, CHKP, FEYE, and PFPT have market cap to sales multiples of 7.9x, 9.3x, 3.6x, and 8x, respectively.

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Price-to-book ratio

Fortinet’s price-to-book ratio for 2019 is estimated at 13.0x. PANW, CHKP, FEYE, and PFPT have price-to-book ratios of 21.2x, 4.76x, 4.89x, and 12.5x, respectively.

ROA and ROE

Fortinet’s ROA (return on assets) is lower among its peers and estimated at 4.9% for 2019, while its ROE (return on equity) is expected to be 29.4%. PANW, CHKP, FEYE, and PFPT have ROAs of 9.9%, 17.9%, 0.3%, and 11.5%, respectively.

Capex and cash-flow-to-sales ratio

Fortinet’s capex-to-sales ratio is the highest among peers at 6.1%. PANW, CHKP, FEYE, and PFPT have capex-to-sales ratios of 4.1%, 1.4%, 5.1%, and 4.4%, respectively.

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