Fortinet (FTNT) Stock: Still the Best Pure-Play in Cybersecurity

Fortinet Inc (NASDAQ:FTNT) stock roared as much as 10% higher in early trading on Tuesday, after a blowout first-quarter earnings report got Wall Street giddy about the company’s future. And hey, why shouldn’t investors be giddy?

Fortinet inc FTNT Stock best cybersecurity stock to buyRevenue breezed past expectations, coming in at $212.9 million, easily topping $205.2 million estimates. Earnings per share of 8 cents also beat the 6 cents Wall Street was expecting.

Bottom line: FTNT stock remains the finest pure-play on cybersecurity in the stock market today.

Cybersecurity: Who Doesn’t Want It?

Investors have watched with glee as the FTNT stock price has soared over the last year. Shares are up more than 70% in that time as the stock market increasingly cheered the consistent, impressive results from the network security leader. In fact, Fortinet has either met or exceeded EPS estimates for 13 straight quarters.

Rival Palo Alto Networks Inc (NYSE:PANW) has also seen its stock price explode higher in the last 52 weeks, and analysts expect sales to grow by nearly 50% this fiscal year and 33% in fiscal 2016. But there’s just one simple reason I prefer FTNT stock to PANW: Fortinet is actually profitable.

On top of that, the range of clients that Fortinet can serve gives FTNT stock owners exposure to both Fortune 500 companies and small businesses, making it a perfect way to bet on IT spending on both macro- and micro-levels.

FTNT Stock Isn’t Done Growing

Just last month, I tapped FTNT as one of just five elite stocks I feel will one day be blue-chip stocks in the future. At the time, Fortinet’s market capitalization was just under $6 billion, making it the smallest company on the list. Put a different way, Fortinet had the most growth potential.

High-profile security breaches have all but become a regularity in the modern day and age. From Target Corporation (NYSE:TGT) to Home Depot Inc (NYSE:HD) to Sony Corp (ADR) (NYSE:SNE) to the U.S. military, some of the world’s largest institutions have been compromised.

With corporations piling up cash (see chart below) and looking for ways to deploy it, you better bet cybersecurity expenses will be some of the easiest cost-benefit decisions to make.

corporate-cash-percentage-of-assets

Source: JPMorgan Asset Management

FTNT stock will clearly benefit from cash-rich companies scrambling to address an urgent need. As Hilary Kramer, editor of GameChangers, noted in a post touting Fortinet stock last October:

“…a Fortinet survey found that 90% of Chief Technology Officers were more uncertain about their abilities to keep IT infrastructure secure and were feeling pressure from their boards to make sure their systems were safe. This reinforces what we already know, which is that demand for security spending should remain high.”

While it can sometimes seem like you’re paying a premium to buy into a stock after one-day gains like the ones we’re seeing today, remember Warren Buffett’s timeless adage: “It’s better to buy a great company at a fair price than a fair company at a great price.”

As of this writing John Divine held no positions in any of the stocks mentioned. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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