Software company Fortinet, Inc. (FTNT) surpassed consensus estimates in its latest reported quarter. It beat revenue estimates by 2.3% and EPS estimates by 20.6%.

According to Ken Xie, FTNT's Founder, Chairman, and CEO, "Fortinet's future growth will be driven by the convergence of security and networking, the industry trend of vendor and product consolidation, the elevated threat environment, and a greater focus on offering services for existing and new customers."

Moreover, the company recently announced its FortiGate Cloud-Native Firewall (FortiGate CNF) on Amazon Web Services, an enterprise-grade, managed next-generation firewall service specifically designed for AWS environments.

This product will offer advanced solutions to customers at a reasonable cost, like utilizing Artificial Intelligence backed Security Services for real-time protection against malicious external and internal threats.

FTNT has lost 8.8% over the past month and 27.6% year-to-date to close the last trading session at $52.08. However, it has gained 5.1% over the past three months.

Here is what could shape FTNT's performance in the near term:

Solid Financials

FTNT's total revenue came in at $1.15 billion for the third quarter that ended September 30, 2022, up 32.6% year-over-year. Its gross profit came in at $866.50 million, up 32.1% year-over-year. Also, its non-GAAP net income came in at $262.70 million, up 58.3% year-over-year, while its non-GAAP EPS came in at $0.33, up 65% year-over-year.

Favorable Analyst Expectations

Analysts expect FTNT's revenue to increase 32.6% year-over-year to $4.43 billion in 2022 and 21.7% year-over-year to $5.39 billion in 2023. Its EPS is expected to increase 43.7% year-over-year to $1.15 in 2022 and 21.7% year-over-year to $1.40 in 2023.

It surpassed EPS estimates in all four trailing quarters. In addition, Wall Street analysts expect the stock to hit $66.37 soon, indicating a potential upside of 27.4%.

Robust Profitability

FTNT's trailing-12-month gross profit margin of 75.21% is 50.6% higher than the industry average of 49.94%. Its trailing-12-month EBITDA and net income margins of 22.56% and 18.12% are 87.3% and 453.1% higher than the industry averages of 12.05% and 3.28%, respectively.

In addition, its trailing-12-month ROCE, ROTC, and ROTA of 307.20%, 39.93%, and 13.92% are compared with the industry averages of 5.00%, 3.24%, and 1.74%, respectively.

POWR Ratings Reflect Promising Outlook

FTNT has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

FTNT has an A grade for Quality, consistent with its higher-than-industry profitability margins. Also, it has an A grade for Sentiment, in sync with favorable analyst expectations.

In the 22-stock Software – Security industry, FTNT is ranked first.

Click here for the additional POWR Ratings for FTNT (Growth, Value, Momentum, Stability).

View all the top stocks in the Software – Security industry here.

Bottom Line

FTNT registered solid top and bottom-line performances in its latest quarter and is trading above its 50-day moving average of $51.86.

Moreover, the United States is expected to contribute the most to the global software industry in 2022, with an estimated revenue figure of $297.10 billion. This might bode well for FTNT. Although the stock has declined in price this year amid the broader market sell-off, it could be an ideal buy now.

How Does Fortinet, Inc. (FTNT) Stack up Against Its Peers?

While FTNT has an overall POWR Rating of B, one might consider looking at its industry peers, Check Point Software Technologies Ltd. (CHKP), Trend Micro Incorporated (TMICY), and Radware Ltd. (RDWR), which also have an overall B (Buy) rating.

FTNT shares were trading at $51.54 per share on Tuesday afternoon, down $0.54 (-1.04%). Year-to-date, FTNT has declined -28.30%, versus a -15.84% rise in the benchmark S&P 500 index during the same period.

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.

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