Fortinet Inc (FTNT)

Conclusion

Fortinet provides cybersecurity products, including firewalls, secure networking, cloud security and endpoint protection, sold worldwide. At 122.47 USD per share (9 November 2026), the company has a market capitalisation of 89.98 billion USD and an enterprise value of 85.68 billion USD.

The verdict is fair. The P/E of 39.43 sits at a premium of -29.2% to its ten-year median of 55.68, and EV/EBITDA of 28.97 at -33.5% to its median of 43.59. The fair value band runs from 112.15 to 168.22 USD with a midpoint of 140.18 USD, a margin of safety of 14.5% at the current price. The DCF gives 148.02 USD per share at a discount rate of 10.1%, while the fair value from historical multiples is 132.34 USD. The reverse DCF implies revenue growth of 12.8% a year, against 21.3% actually delivered over five years.

The strongest supports are free cash flow conversion of 150.3% over the last twelve months, an operating margin of 33.0% against a ten-year median of 20.0%, and an Altman Z-score of 7.24. The weakest numbers are the price-to-book ratio of 40.05 against a median of 24.44 (premium of 63.8%), the price-to-sales ratio of 11.42 against a median of 9.36 (premium of 21.9%), and the terminal value share of the DCF at 58.1%. A slowdown in revenue growth below the 12.8% implied by the price would weaken the case.

Financial health

Financial strength is green, supported by a net cash position, high interest coverage and a strong Altman Z-score. The current ratio is 1.40 and the quick ratio 1.23 as of 30 September 2026. Net debt to EBITDA is -1.45, meaning net cash, and debt to equity is 0.22. Interest coverage is 189.0 on a trailing twelve-month basis. The Altman Z-score is 7.24, in the safe zone. The Altman model was designed for manufacturers, so this reading is only indicative for a software business. Insolvency risk is low, about 2.6% by the estimate of the Ohlson model over one to two years, based on figures as of 31 December 2025.

Earnings quality

Earnings quality is green. Free cash flow conversion is 150.3% on a trailing twelve-month basis and 136.7% over five years, so reported profit is well backed by cash. The accrual ratio is -0.0732, which points to cash earnings exceeding accounting earnings. Stock-based compensation is 3.9% of revenue, and free cash flow after it is 3.13 billion USD. The share count fell at a compound rate of 1.8% over five years, which reflects buybacks. The Piotroski score is 7 out of 9. The Beneish M-score is -2.70, in the unlikely range for earnings manipulation. Fortinet beat its earnings estimates in all eight of the last quarters, with an average surprise of 18.4%. Analysts raised current-year estimates, with 35 upward revisions and 1 downward revision in the last 30 days, and next-year estimates rose 3.8% over 90 days.

Profitability

Profitability is green. The gross margin is 79.8% against a ten-year median of 76.6%, the operating margin 33.0% against 20.0%, and the net margin 29.0% against 18.7%. The operating margin stability reading is 0.45. Return on invested capital and the spread over the cost of capital are not available, because the company's invested capital is not positive. The cost of capital (WACC) is 10.0%. Return on equity is 101.6% on a trailing twelve-month basis, a figure inflated by leverage. The 2025 DuPont split shows a net margin of 27.3%, an asset turnover of 0.65 and an equity multiplier of 8.40, so most of the return on equity comes from the balance sheet multiplier rather than from asset efficiency.

Growth

Growth is green. Revenue compounded at 15.5% over three years, 21.3% over five years and 21.0% over ten years. Revenue grew in all ten of the last ten years. Earnings per share compounded at 31.6% over three years, 33.0% over five years and 74.9% over ten years. Free cash flow per share compounded at 17.4% over three years, 20.6% over five years and 26.5% over ten years. Analysts expect next-year earnings per share growth of 9.5%, a slower pace than the historical record.

Valuation

Valuation is yellow. Current multiples are below their ten-year medians for earnings, EBITDA and free cash flow, but above them for sales and book value. The P/E of 39.43 compares with a median of 55.68 (premium -29.2%). EV/EBITDA is 28.97 against 43.59 (premium -33.5%), and price to free cash flow is 26.22 against 28.34 (premium -7.5%). Price to sales is 11.42 against 9.36 (premium 21.9%), and price to book is 40.05 against 24.44 (premium 63.8%). The DCF gives 148.02 USD per share, using a discount rate of 10.1%, growth of 20.0% in the first stage and 2.5% in the terminal stage. The terminal value accounts for 58.1% of that figure. The fair value band is 112.15 to 168.22 USD with a midpoint of 140.18 USD, built on fixed assumptions including a 5% equity risk premium and capped growth, so it is not a price target. The reverse DCF implies revenue growth of 12.8% a year, against 21.3% achieved over five years. The company pays no dividend, with a forward yield of 0%.

Risks

The main risk is the valuation premium on book value and sales. A price-to-book ratio of 40.05 against a median of 24.44 relies on the company keeping very high returns on a small equity base, and the 101.6% return on equity is largely a product of leverage. If revenue growth fell below the 12.8% implied by the price, the case would weaken, since five-year revenue growth is 21.3% but next-year earnings growth is expected at 9.5%. The DCF rests on the terminal value for 58.1% of its result, so small changes in the long-term growth or discount assumptions would move the fair value considerably. The return on invested capital and the spread over the cost of capital are not available, so the quality of growth cannot be checked against them. The analysis also lacks a debt maturity schedule and revenue by segment, so refinancing and product concentration risks cannot be assessed.