Fortinet (FTNT) is a $3.3 billion market cap company specializing in network security. It focuses specifically on unified threat management, which means the typical firewall has evolved into an all-in-one product that detects and prevents intrusions. The company offers a number of application control and firewall software offerings, but its flagship device is FortiGate, a network security platform that can work for anyone from small offices and retailers to large enterprises and data centers.
The stock hit a low point last fall, dipping down to the mid-teens when CFO Ahmed Rubaie left the company after only a short time, citing personal reasons. Wall Street never likes to see senior executives leave if there’s no real turnaround in the works, and investors get jittery that the current business course may be interrupted with new management in place. However, shares rebounded nicely and have since stabilized as Andrew DelMatto was named CFO.
FTNT’s most recent results also indicate a good rebound from a tough first half last year. Last month, the company posted earnings of 15 cents a share, beating estimates by a penny, on a 17% increase in revenues to $177 million, which easily outpaced the $166 million the Street had anticipated.
Many of FTNT’s security peers have actually seen slowdowns in these segments, which further hints that the company is gaining market share. In fact, management called out a specific large deal at a telecom carrier, where it displaced McAfee and Juniper.
Firing on all cylinders, I see FTNT earning as much as 75 cents per share in 2015. Using the midpoint of the 4-8X sales multiple that peers trade at (typically used as a yardstick for “takeout” value), we get a target range of $29-$30. The company also has $161 million remaining under its buyback program, which could help boost shares in the near term.