NEW YORK (TheStreet) -- Fortinet (FTNT - Get Report) was falling 5.6% to $21.99 Thursday as a result of computer security competitor Imperva (IMPV) lowering its first-quarter earnings and revenue outlook.
Imperva announced that it now expects a loss of between 44 cents and 40 cents a share in the quarter, down from a loss of 37 cents to 33 cents a share. Analysts surveyed by Thomson Reuters expect a loss of 35 cents. The company expects revenue of $31 million to $31.5 million, down from #36 million to $37 million, while analysts expect $36.96 million.
The lowered estimates caused Fortinet stock to fall in sympathy.
TheStreet Ratings team rates FORTINET INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate FORTINET INC (FTNT) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- FTNT's revenue growth has slightly outpaced the industry average of 11.4%. Since the same quarter one year prior, revenues rose by 17.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- FTNT has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, FTNT has a quick ratio of 1.51, which demonstrates the ability of the company to cover short-term liquidity needs.
- The gross profit margin for FORTINET INC is currently very high, coming in at 72.20%. Regardless of FTNT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, FTNT's net profit margin of 6.77% is significantly lower than the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 44.1% when compared to the same quarter one year ago, falling from $21.51 million to $12.02 million.
- Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. When compared to other companies in the Software industry and the overall market, FORTINET INC's return on equity is below that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: FTNT Ratings Report