QS Research · Michael Burry's Scion Capital analyst template · 2006
Fortinet, Inc. (FTNT)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $123.57 (close 2026-11-10)
Conclusion: WATCH
Conviction low · base case +71% · downside -40% · upside +18%
Fortinet is a high-quality cash compounder — TTM revenue $7.88B, EBITDA $2.76B, FCF $3.55B, 45.0% FCF margin and $4.30B net cash (N11, N15, N19, N39, N24) — but at $123.57 the market already pays 10.97x EV/Sales, 31.3x EV/EBITDA and 24.4x EV/FCF (N27, N28, N37), so the value score is 39/100 (N53). The 20% post-Q3 drop was multiple compression on a trimmed service revenue guide and decelerating product growth (S67, S97), not a broken business: billings grew 29% to $2.34B and FY2026 guidance was raised to $8.125-$8.215B revenue and $3.54-$3.58 non-GAAP EPS (S31). The independent anchor is the peer-median 68.2x P/E, which gives $211.75 (+71%, N55), but that anchor is a peer artifact (PANW 870.1x, CRWD 5137.5x, OKTA 105.3x, S1) and the downside at a compressed multiple is -26% (8.0x EV/Sales on TTM revenue, section 13), so the reward/risk is roughly 0.7-0.8:1 and the rule is not met. I pass on the price and watch the 2027-02-04 print for evidence that service revenue and product growth re-accelerate.
Key numbers
- Share price: $123.57
- Market cap: $90.79B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $7.88B
- EV / EBITDA (TTM): 31.3x
- P/E (TTM): 39.8x
- FCF yield: 3.9%
- Price / book: 40.41x
- EV / FCF (TTM): 24.4x
- Revenue growth (latest fiscal year): +14.2%
The 15 boxes
- ✓ 1. Long-form business notes
FTNT sells an integrated cybersecurity platform—FY2025 10-K says over 50 products across Secure Networking, Unified SASE and AI-Driven SecOps—primarily through two-tier distribution. Between FY2020 and FY2025 revenue rose from $2.59B to $6.80B and operating income from $531.8M to $2.08B; XBRL TTM to Sep 30 2026 shows $7.88B revenue and $2.60B operating income. Cash flow and buybacks scaled, and diluted shares fell. The provided sources do not break out revenue by product, service or segment, so unit economics and recurring-revenue mix cannot be quantified.
- ✓ 2. Competitive advantage
The sources do not establish a single durable moat. They show a high-margin, cash-generative business with TTM gross margin 79.8% and operating margin 33.0%, and management claims breadth and integration as its edge. But the 10-K names a long list of larger, better-branded competitors, says Fortinet may cut prices or add features, and new/rewritten risk factors flag AI competition and memory-chip cost pressure.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended Sep 30, 2026) revenue was $2.0784B, up 20% y/y, with product revenue up 37% and service revenue up 13%. Q3 gross margin fell to 79.0% while operating margin rose to 33.9%; billings grew 29% to $2.34B and Q3 operating cash flow was $946.0M. The earnings release gives numeric Q4 and FY2026 guidance, while the 10-Q risk factors list component shortages, including chips, among factors that could make results vary.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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