Is Fortinet (FTNT) a Strong Growth Stock? Three Reasons to Believe in Its Potential

Investors are always on the lookout for growth stocks that can deliver above-average returns through impressive financial growth. However, identifying a growth stock that truly meets these expectations is often challenging. Growth stocks are typically characterized by greater volatility and above-average risk, which can sometimes lead to unexpected losses if a company's growth trajectory slows down or comes to an end.

The search for promising growth stocks is simplified by the Zacks Growth Style Score, which assesses a company's actual growth potential in addition to traditional growth metrics. Currently, Fortinet (FTNT) is among the recommended stocks by this system, boasting not only a favorable Growth Score but also a top-notch Zacks Rank.

Research indicates that stocks exhibiting the strongest growth characteristics tend to outperform the broader market. Particularly consistent returns are seen in stocks with a Growth Score of A or B along with a Zacks Rank of #1 (Strong Buy) or #2 (Buy).

Earnings Growth

Earnings growth is arguably one of the most critical factors for investors, as rising profit levels are essential for capturing their attention. For growth investors, double-digit earnings growth is highly sought after, as it suggests strong company prospects and potential stock price increases.

Fortinet has demonstrated an impressive historical earnings per share (EPS) growth rate of 42%. However, what should capture investors' attention even more is the projected growth rate; Fortinet's EPS is expected to increase by 33.6% this year, significantly outpacing the industry average growth of 30.1%.

Cash Flow Growth

For growth-oriented companies, robust cash flow growth is critical, as it allows for expansion without heavy reliance on costly external funding. Currently, Fortinet boasts a year-over-year cash flow growth of 34.6%, surpassing many competitors in the industry. In stark contrast, the industry as a whole is experiencing a decline in cash flow, averaging -14.4%.

When evaluating growth metrics, it's also beneficial to consider historical performance. Fortinet's annualized cash flow growth rate over the past 3-5 years stands at 34.5%, compared to the industry's average of 15.2%. This consistent performance illustrates the company's solid cash flow management.

Encouraging Earnings Estimate Revisions

A stock’s potential can often be validated through positive trends in earnings estimate revisions. A growing trend is generally a good sign, as studies have shown a solid correlation between earnings estimate trends and imminent stock price movements.

Recently, Fortinet has seen upward revisions in its current-year earnings estimates, with the Zacks Consensus Estimate for this year soaring by 7.8% over the past month. Such revisions reflect growing confidence in the company’s performance moving forward.

Conclusion

With its robust earnings, impressive cash flow growth, and favorable revisions in earnings estimates, Fortinet has established itself as a noteworthy stock, earning a Zacks Rank of #1 and a Growth Score of B.

This combination of factors positions Fortinet as a potentially valuable addition for growth investors seeking solid investment opportunities.

growth, investment, stocks