Is Fortinet (FTNT) a Strong Growth Stock? Here's Why It Could Be

When investors look for growth stocks, they seek out companies that demonstrate above-average growth in their financial performance. These stocks can capture investor interest and lead to impressive returns. However, identifying a growth stock that delivers on its potential can be challenging.

Growth stocks tend to be more volatile and involve a higher level of risk. There is also the risk that the growth prospects of a stock may be waning or over. Therefore, careful analysis is crucial.

Lucky for investors, tools such as the Zacks Growth Style Score help simplify the search for promising growth stocks. This system evaluates a company's growth potential beyond traditional metrics.

One stock that stands out according to this analysis is Fortinet (FTNT). It has not only received a favorable Growth Score but also boasts a strong Zacks Rank.

Research has consistently shown that stocks with robust growth attributes often outperform the broader market. Stocks that feature a Growth Score of A or B and a Zacks Rank of #1 (Strong Buy) or #2 (Buy) tend to perform even better.

Here are three compelling reasons that position Fortinet as an attractive growth stock right now.

Earnings Growth

Among various financial metrics, earnings growth is paramount. Investors are primarily focused on increasing profit levels, with double-digit earnings growth being especially desirable. This is often viewed as a sign of strong future performance and potential stock price appreciation.

For Fortinet, the historical earnings per share (EPS) growth rate stands at an impressive 42%. However, what truly captures attention is the projected growth, with analysts expecting EPS to rise by 33.6% this fiscal year, outperforming the industry average of 30.1%.

Cash Flow Growth

While cash flow is considered the foundation of any business, its growth takes on heightened importance for companies focused on expansion, like Fortinet. Higher cash flow growth provides companies with the means to fund growth internally rather than relying on external financing.

Currently, Fortinet enjoys a year-over-year cash flow growth rate of 34.6%, outpacing many of its competitors in the industry. This is in stark contrast to the industry average, which is currently negative at -14.4%.

Additionally, looking at the long-term trends enhances the significance of Fortinet's current cash flow growth. Over the past three to five years, the company has averaged an annual cash flow growth of 34.5%, well above the industry average of 15.2%.

Promising Earnings Estimate Revisions

The trend of earnings estimate revisions can offer further validation of a stock's performance potential. A positive revision trend is generally a good sign. Research indicates a strong link between earnings estimate revision trends and subsequent stock price movements.

Fortinet has seen upward revisions in its current-year earnings estimates, with the Zacks Consensus Estimate climbing by 7.8% over the past month.

Bottom Line

Given the overall positive revisions in earnings estimates, Fortinet has achieved a Zacks Rank of #1, along with a respectable Growth Score of B based on several key metrics.

This combination of strong performance indicators suggests that Fortinet is poised to outperform and represents a solid option for growth-minded investors.

Fortinet, Growth, Earnings