Is Fortinet (FTNT) a Strong Growth Stock? Three Reasons to Consider

Investors are increasingly drawn to growth stocks for the opportunity to benefit from substantially higher earnings that can lead to exceptional financial returns. However, identifying a growth stock that truly fulfills its potential can be quite challenging.

Investing in growth stocks often involves inherent volatility and above-average risk. There's always the chance of investing in a company whose prospects have peaked or are declining.

Fortunately, tools such as the Zacks Growth Style Score can simplify the process of uncovering promising growth stocks. This scoring system evaluates a firm's actual growth potential beyond mere traditional metrics.

Fortinet (FTNT) stands out as a stock currently recommended by this system. The company enjoys a favorable Growth Score alongside a top Zacks Rank.

Research has demonstrated that stocks boasting superior growth characteristics tend to outperform the market consistently. Particularly, those stocks that achieve a Growth Score of A or B combined with a Zacks Rank of #1 (Strong Buy) or #2 (Buy) show even stronger returns.

Robust Earnings Growth

Earnings growth is a vital indicator for investors, as increasing profits are what many aim for. For growth-oriented investors, double-digit earnings growth is especially appealing, often signifying strong future prospects and potential price appreciation for the company.

Fortinet has exhibited an impressive historical EPS growth rate of 42%. However, what's even more significant is the projected growth, with the company's earnings per share (EPS) anticipated to increase by 33.6% this year. This is markedly higher than the industry average, which stands at 30.1%.

Strong Cash Flow Growth

Cash flow is the lifeblood of any business. For companies focused on growth, higher-than-average cash flow growth is crucial, as it provides the necessary capital for expansion without the need for costly external funding.

Fortinet currently experiences a year-over-year cash flow growth rate of 34.6%, significantly outpacing many of its competitors. In fact, this is in stark contrast to the industry average, which has dipped to -14.4%.

When evaluating cash flow growth, considering historical rates alongside current metrics offers valuable context. Over the past 3-5 years, Fortinet has achieved an annualized cash flow growth rate of 34.5%, compared to the industry average of 15.2%.

Positive Earnings Estimate Revisions

The strength of a stock can also be affirmed through analyzing trends in earnings estimate revisions. A consistent upward trend is generally favorable, as historical data indicates a strong correlation between such trends and short-term stock performance.

There have been several upward revisions in Fortinet's current-year earnings estimates. The Zacks Consensus Estimate for this year has risen by 7.8% in just the past month.

Conclusion

Fortinet's excellent performance in earnings estimate revisions and its overall metrics have earned it a Zacks Rank of #1, as well as a Growth Score of B. These indicators suggest that Fortinet is well-positioned for potential outperformance, making it a solid choice for growth investors.

growth, stocks, earnings