Is Fortinet Stock a Buy Now?

Fortinet (FTNT 1.51%) stock has been in scintillating form on the stock market over the past six months, rising a remarkable 55% as of this writing on the back of solid quarterly reports that point toward an improvement in the cybersecurity specialist's growth profile. Shares of the company received another shot in the arm after the release of its fourth-quarter 2024 results on Feb. 6. Fortinet stock was up nearly 3% following this report as revenue and earnings were well ahead of what analysts were anticipating. The guidance was the icing on the cake as Fortinet's 2025 outlook also exceeded consensus estimates. Should investors consider buying Fortinet stock right now following its recent rally in anticipation of more upside? Let's find out. Fortinet's valuation is on the expensive side The recent rally in Fortinet stock has brought its price-to-earnings ratio to 48, which is expensive when compared to the tech-laden Nasdaq-100 index's multiple of 34 (using the index as a proxy for tech stocks). The forward earnings multiple of 45 isn't cheap either, suggesting that analysts aren't expecting a huge increase in the company's bottom line this year. More specifically, analysts are predicting an increase of just 5% in Fortinet's earnings this year to $2.48 per share, which is a penny above the higher end of the company's guidance range. That's going to be much slower than Fortinet's 2024 earnings jump of 45%. It is worth noting that Fortinet completed three acquisitions last year, which positively impacted its billings and must have given its bottom line a boost as well. The company was originally anticipating 2024 earnings to land between $1.65 and $1.70 per share. Fortinet's earnings also benefited from a decline in inventory write-downs last year, which led to a sharp increase in its gross margin in 2024. So, Fortinet's robust earnings growth last year was driven by additional factors that are likely to be absent in 2025, thereby leading to much slower bottom-line growth. That's why investors who are looking to buy this cybersecurity stock right now may be concerned about its high valuation and slower pace of earnings growth. However, the following chart indicates that analysts are expecting an acceleration in Fortinet's earnings growth over the next couple of years. FTNT EPS Estimates for Current Fiscal Year data by YCharts That doesn't seem surprising considering that Fortinet is gradually building a solid revenue pipeline, which should allow it to clock healthy revenue and earnings growth. Why this high-flying stock may be able to justify its valuation Fortinet points out that it is the leading vendor in the network firewall security market, citing third-party estimates, with a market share of more than 50%. This puts Fortinet in a solid position to capitalize on the network firewall market that's expected to grow by nearly two-and-a-half fold through 2034. Additionally, Fortinet is gaining traction in the fast-growing unified secure access service edge (SASE), which combines networking and security into a single platform. Unified SASE is gaining traction thanks to the growing usage of cloud-based services as well as the surge in remote and hybrid work in recent years. This market is expected to clock 12% annual growth through 2029 and generate $17 billion in annual revenue, according to one estimate. The good part is that Fortinet seems to be growing at a faster pace than the unified SASE market. The company's remaining performance obligations (RPO) in unified SASE increased 21% year over year in the fourth quarter of 2024 to $1.45 billion. This metric refers to the total value of a company's contracts that are yet to be fulfilled. So, the pace at which Fortinet is signing contracts in unified SASE suggests that it is on track to corner a nice portion of this space in the long run. All this shows why analysts are forecasting an improvement in Fortinet's earnings growth. Assuming the company manages to generate $3.41 per share in earnings in 2027 and trades at 44 times earnings at that time (in line with its five-year average forward earnings multiple), its stock price could hit $150. That would be a jump of 39% from current levels. However, more upside cannot be ruled out if Fortinet manages to grow at a stronger pace thanks to its solid position in network security and impressive growth in the unified SASE space. So, investors can still consider buying this cybersecurity stock as it could sustain its impressive rally in the long run.