NEW YORK ( TheStreet) -- Fortinet (Nasdaq: FTNT) has been upgraded by TheStreet Ratings from sell to hold. 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 solid stock price performance. However, as a counter to these strengths, we find that the company's return on equity has been disappointing.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 0.8%. Since the same quarter one year prior, revenues rose by 37.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the 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 1.85, which demonstrates the ability of the company to cover short-term liquidity needs.
  • FORTINET INC has improved earnings per share by 22.2% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, FORTINET INC reported lower earnings of $0.27 versus $0.44 in the prior year. This year, the market expects an improvement in earnings ($0.37 versus $0.27).
  • The gross profit margin for FORTINET INC is currently very high, coming in at 74.80%. 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 15.40% is significantly lower than the same period one year prior.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Software industry and the overall market on the basis of return on equity, FORTINET INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

Fortinet, Inc., together with its subsidiaries, provides network security appliances and unified threat management (UTM) network security solutions to enterprises, service providers, and government entities worldwide. The company has a P/E ratio of 47.7, below the average computer software & services industry P/E ratio of 48.3 and above the S&P 500 P/E ratio of 17.7. Fortinet has a market cap of $2.6 billion and is part of the technology sector and computer software & services industry. Shares are up 18.2% year to date as of the close of trading on Tuesday.

You can view the full Fortinet Ratings Report or get investment ideas from our investment research center.
null