Stocks To Watch: Fortinet
California-based Fortinet has set itself apart by targeting software-defined wide-area networks, or SD-WANs, an emerging computer networking technology. With SD-WAN, companies have less need for costly private data networks leased from telecom companies.
But along with the SD-WAN savings comes an increased security risk from data going over the public internet.
In the most recent quarter, reported Oct. 29, Fortinet earned an adjusted 88 cents per share on sales of $651.1 million. On a year-over-year basis, Fortinet earnings rose 31% as sales climbed 19%.
“The pandemic has accelerated digital transformation and cloud migration efforts creating multiple edges that require protection. Fortinet’s security-driven networking approach protects these edges, whether they are at the branch, cloud, data center, home, network or WAN edge,” said CEO Ken Xie in a press release.
Fortinet holds a spot in IBD’s newest key stock list, the Long-Term Leaders.
No. 3-Ranked Cybersecurity Stock
The stock shows a best-possible 99 EPS Rating, but a strong A SMR Rating, according to IBD Stock Checkup. The Earnings Per Share Rating tracks a company’s earnings strength. The SMR Rating analyzes a company’s sales, margins and return on equity.
IBD Stock Checkup also shows that FTNT stock boasts a strong 98 out of a perfect 99 IBD Composite Rating, making it one of the top-ranked stocks in the cybersecurity industry. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
The cybersecurity leaders are both extended from previous buy points after breakaway gaps on Dec. 3.
Fortinet Stock Eyes New Buy Point
Fortinet stock briefly broke out above a 152.05 buy point in a cup base on Dec. 22, according to IBD MarketSmith chart analysis. Shares are about 3% below that buy point amid a four-day losing streak. The stock fell over 1% Tuesday. Shares looked to snap that losing streak Wednesday with a 1.3% gain in morning trade.
Look for a strong move back above the buy point before initiating a new position.
A real flaw is the stock’s lagging relative strength line. It remains far from its old highs despite rising in recent weeks. The RS line measures a stock’s price performance vs. the general market. It is the blue line on every IBD chart.
Investors should normally focus on stocks with strong RS lines. For example, Intuitive Surgical (ISRG) boasts an RS line that hit a new high on the breakout day. Intuitive Surgical was featured in this week’s Stocks Near A Buy Zone column.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the stock market.
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