A significant driver of top-line growth: Fortinet Inc. (FTNT)

Fortinet Inc. (NASDAQ: FTNT) stock jumped 0.52% on Friday to $60.37 against a previous-day closing price of $60.06. With 4.01 million shares changed hands, the volume of the stock remained lighter than its average volume of 6.35 million shares. During the session, the Software – Infrastructure company that operates in wider Technology sector, reached to the highest price of $61.03 whereas the lowest price it dropped to was $59.41. The 52-week range on FTNT shows that it touched its highest point at $74.35 and its lowest point at $48.73 during that stretch. It currently has a 1-year price target of $71.80. Beta for the stock currently stands at 1.15.

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Price Performance and Earnings:

Stock performance is one of the indicators that investors use to determine whether they will profit from a stock. The price performance of FTNT was up-trending over the past week, with a rise of 7.31%, but this was up by 5.23% over a month. Three-month performance surged to 3.37% while six-month performance rose 1.55%. The stock gained 6.05% in the past year, while it has lost -16.01% so far this year. A look at the trailing 12-month EPS for FTNT yields 0.77 with Next year EPS estimates of 1.24. For the next quarter, that number is 0.22. This implies an EPS growth rate of 24.70% for this year and 19.61% for next year. EPS is expected to grow by 20.70% annually over the next five years; however, over the past five years, the company experienced an annual growth rate of 81.90%.

Float and Shares Shorts:

At present, 803.50 million FTNT shares are outstanding with a float of 655.25 million shares on hand for trading. On Jul 14, 2022, short shares totaled 11.51 million, which was 1.43% higher than short shares on Jun 14, 2022. In addition to Mr. Ken Xie as the firm’s Founder, Chairman & CEO, Mr. Michael Xie serves as its Founder, Pres, CTO & Director.

Institutional Ownership:

Through their ownership of 70.78% of FTNT’s outstanding shares, institutional investors have majority control over the company. Other institutions hold 5.01% of FTNT, in contrast to 39.76% held by mutual funds. Shares owned by individuals account for 28.81%. As the largest shareholder in FTNT with 8.13% of the stake, The Vanguard Group, Inc. holds 65,252,425 shares worth 65,252,425. A second-largest stockholder of FTNT, T. Rowe Price Associates, Inc., holds 53,483,675 shares, controlling over 6.66% of the firm’s shares. BlackRock Fund Advisors is the third largest shareholder in FTNT, holding 39,709,995 shares or 4.95% stake. With a 2.51% stake in FTNT, the Vanguard Total Stock Market Index is the largest stakeholder. A total of 20,115,986 shares are owned by the mutual fund manager. The Vanguard 500 Index Fund, which owns about 1.84% of FTNT stock, is the second-largest Mutual Fund holder. It holds 14,743,254 shares valued at 834.17 million. Invesco QQQ Trust holds 1.45% of the stake in FTNT, owning 11,625,393 shares worth 657.76 million.

An Overview of Recent Financials:

Understanding a company as a customer does not mean you will understand it as an investor. The wise investor uses quantitative research to analyze metrics such as revenue, net income, and earnings. In its fiscal quarter reported on Mar 30, 2022, FTNT reported revenue of $954.80M and operating income of $149.90M. Over the past year, revenue came in at $3.59B while operating income stood at $679.80M. It generated $138.40M net income for the quarter, which came to $638.00M over the last twelve months. The EBITDA in the recently reported quarter was $168.70M and diluted EPS was $0.17. EBITDA for the full year was $758.40M.

Analysts Ratings:

Reading analyst opinions is an effective way to decide where to invest, and there are several opinions available for FTNT since 27 analysts follow the stock currently. There are 16 analysts who recommend BUY ratings, while 0 suggest SELL ratings. Of the remaining analysts, 8 believe that the stock is worth HOLDING, 3 give it an OVERWEIGHT rating, and 0 thinks that it’s UNDERWEIGHT. In the same way, a target price assigned to a stock can also reveal much about its potential. With FTNT analysts setting a high price target of $85.00 and a low target of $60.00, the average target price over the next 12 months is $71.97. Based on these targets, FTNT could surge 40.8% to reach the target high and fall by -0.61% to reach the target low. Reaching the average price target will result in a growth of 19.21% from current levels.

EPS: Estimates vs Actual

It is also common to use earnings estimates to evaluate a firm’s growth potential and to determine trading strategy. FTNT will report FY 2022 earnings on 02/02/2023. Analysts have provided yearly estimates in a range of $1.30 being high and $1.00 being low. For FTNT, this leads to a yearly average estimate of $1.03. The earnings surprise of a firm occurs when the actual results change from the consensus earnings estimate. Fortinet Inc. surprised analysts by $0.03 when it reported $0.19 EPS against a consensus estimate of $0.16. The surprise factor in the prior quarter was $0.02. Based on analyst estimates, the high estimate for the next quarter is $0.23 and the low estimate is $0.21. The average estimate for the next quarter is thus $0.22.

Summary of Insider Activity:

Insiders traded FTNT stock several times over the past three months with 10 Buys and 23 Sells. In these transactions, 9,879 shares were bought while 10,865 shares were sold. The number of buy transactions has increased to 101 while that of sell transactions has risen to 189 over the past year. The total number of shares bought during that period was 126,337 while 191,297 shares were sold.

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