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Here's Why You Should Add Fortinet (FTNT) to Your Portfolio

Fortinet Inc. FTNT has been an investor favorite for quite some time as evident from its price momentum. The stock has gained 45.9% in the past year, substantially outperforming the 32.3% rally of the industry it belongs to.



Let’s delve deeper and take a look at the key aspects aiding the company’s performance.

The stock has a stellar record of positive earnings surprises, having beaten the Zacks Consensus Estimate in all the last four quarters, with an average positive surprise of 20.1%.

In the last reported fourth-quarter 2017 results, the company’s non-GAAP earnings of 32 cents per share beat the Zacks Consensus Estimate of 29 cents and also increased from the year-ago figure of 30 cents per share.

A large number of deal wins and customer additions  aided top-line growth in the quarter that increased 14.8% year over year to reach $416.7 million, beating the Zacks Consensus Estimate of $409 million.

We believe Fortinet’s initiative to change its business model to a subscription-based service provider will drive the company’s bottom line in the long run. Subscription-based service is a high gross margin business (approximately 80%) compared with the hardware-centric model.

Notably, the company generates more than 50% of the total revenues from these services, which  led to a 70 bps expansion in 2017 gross margin. We anticipate this strategy to continue to drive the company’s bottom-line performance.

Notably, per a recent report by Markets and Markets, the cyber security market is expected to witness CAGR of 11% in the 2017-2022 period. These predictions bode well for Fortinet, which has a diversified product portfolio for PCs, mobile and enterprise security. Furthermore, Fortinet has partnered with Exodus Intelligence, Cisco ACI, NTT Communications and VMware NSX Partner Ecosystem to provide best-in-class cyber security solutions.

We believe all these positives make this Zacks Rank #2 (Buy) stock a must have in investors' portfolio.

Some other top-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA, Micron Technology, Inc. MU and Western Digital Corporation WDC, all sporting a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

NVIDIA, Micron and Western Digital have long-term expected EPS growth rates of 10.3%, 10% and 19%, respectively.

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Western Digital Corporation (WDC) : Free Stock Analysis Report
 
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
Micron Technology, Inc. (MU) : Free Stock Analysis Report
 
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