Fortinet stock is trading at a premium valuation
Fortinet (FTNT) stock has risen almost 800.0% since its IPO back in 2009. The stock is up over 100.0% in the last three years and 200.0% in the last five. While the recent pullback has dragged Fortinet stock lower, it seems that the stock is still overvalued due to its stellar historical returns. Let’s see how.
Fortinet is trading at a forward PE multiple of 31.8x. In comparison, the company’s earnings are estimated to rise by just 16.3% in 2019 and 16.0% in 2020. Analysts expect Fortinet’s earnings to rise at a compound annual growth rate of 16.0% in the next five years. The PE multiple suggests that the stock is overvalued. In fact, we had identified Fortinet as an overvalued stock back in April 2019 and the stock has corrected almost 20.0% since then.
How do analysts view Fortinet?
Out of 30 analysts covering Fortinet, 21 recommend a “buy,” and seven recommend a “hold.” There are two “sell” recommendations. The average 12-month price target for Fortinet is $92.08, indicating the stock is trading at a discount of 21% to average estimates.
Is Fortinet a safe bet for investors?
Though Fortinet stock might experience some short-term volatility, it has strong fundamentals. Revenue and earnings are estimated to grow by double digits in the next three years. The company’s debt stands at $39.4 million, which is minimal considering its cash balance of $1.8 billion.
Fortinet is a solid long-term bet for investors with a large addressable market and robust portfolio of solutions.