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Intro

One of the biggest concerns of companies and governments today is cybersecurity. There was the Equifax data breach in 2017 and the Marriot breach in 2018. In the coming years, I predict we’ll see more and more high-profile data breaches. That’s why my wolf stock of the month is a cybersecurity company named Fortinet.

Fortinet is a global leader in broad, automated and integrated cybersecurity solutions. They are a one-stop shop for any business’s cybersecurity needs.

Business Model

Fortinet sells a wide range of cyber security products to businesses of varying sizes.

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Here are some quotes from their 2017 10-K statement:

“Our end-customers include small and medium-sized businesses, large enterprises and government organizations across a wide range of industries, including telecommunications, technology, government, financial services, education, retail, manufacturing and healthcare. An end-customer deployment may involve one of our appliances or thousands, depending on our end-customer’s size and security requirements. We also offer access to our products via the cloud through certain cloud providers such as Amazon Web Services and Microsoft Azure. Many of our customers also purchase our FortiGuard security subscription services and FortiCare technical support services.”

“Among others, our competitors include Check Point Software Technologies Ltd. (“Check Point”), Cisco Systems, Inc. (“Cisco”), F5 Networks, Inc. (“F5 Networks”), FireEye, Inc. (“FireEye”), Forcepoint LLC (“Forcepoint”), Imperva, Inc. (“Imperva”), Juniper Networks, Inc. (“Juniper”), McAfee, LLC. (“McAfee”), Palo Alto Networks, Inc. (“Palo Alto Networks”), Proofpoint, Inc. (“Proofpoint”), SonicWALL, Inc. (“SonicWALL”), Sophos Group Plc (“Sophos”), Symantec Corporation (“Symantec”) and Trend Micro Incorporated (“Trend Micro”).”

The Gartner Magic Quadrant report considers Fortinet a leader in both Enterprise Network Firewalls and Unified Threat Management (from Fortinet’s website).

Stats (as of 1/22/2019)

  • Closing Price: 69.85
  • Trailing P/E: 102
  • Forward P/E: 35
  • Quarterly Revenue Growth (yoy): 21.30%
  • Quarterly Earnings Growth (yoy): 119.90%
  • Total Debt (mrq): N/A
  • Total Debt/Equity (mrq): N/A
  • Current Ratio (mrq): 1.87
  • Levered Free Cash Flow (ttm): 472.22M
  • Forward Annual Dividend Yield: N/A

Stats referenced from Yahoo Finance.

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Chart Action

These past few months, Fortinet has been hit along with the entire market. It’s close to it’s .382 fibonacci retracement and around it’s 40-week moving average. I think it could be a decent area of support.

Risks

The risk I’m primarily concerned with is competition. I’d be concerned if Fortinet dropped off the Gartner Magic Quadrant as a leader. I’d also be concerned if sales start lagging it’s peers.

Should I Buy?

Fortinet could be a great addition to a portfolio that needs some exposure to:

  • The Information Technology sector
  • Cybersecurity stocks

Be sure to do your own research and determine for yourself if Fortinet is a good stock for your portfolio.

How Much Should I Buy?

Here are some portfolio guidelines we Wolves try to live by:

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  • Thou shalt not hold more than 35% in any one particular sector
  • Thou shalt not invest more than 10% of principal into 1 individual stock
  • Thou shalt not place a buy order using more than 4% of my portfolio

For an our updated portfolio management guidelines, click here.

The Bottom Line

Fortinet is a leader in a market segment that has tremendous long-term growth story that could be a good addition to a portfolio that needs information technology or cybersecurity. With 0 debt, earnings growth of 119.90%, and a forward P/E of 35, I think it’s a buy.

Disclosure

I/we own shares of stock in FTNT

Except for Wolves of Investing, I/we are not receiving any compensation from and do not have any business dealings with any companies discussed in this article.

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