Last update on 2024-06-06

Fortinet (FTNT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Fortinet (FTNT) achieved a Piotroski F-Score of 8/9 in 2023, reflecting financial strength and robust operations across key profitability, liquidity, and efficiency metrics.

Short Analysis - Piotroski Score: 8

We're running Fortinet (FTNT) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. Fortinet (FTNT) scored 8 out of 9, showing strong profitability, solid operational efficiency, stable cash flow, and reduced leverage. However, it showed a slight decrease in its current ratio, which assesses liquidity.

Insights for Value Investors Seeking Stable Income

Fortinet exhibits overall robust financial health with an impressive Piotroski F-Score of 8, making it a suitable candidate for investment consideration. Investors should note that while the company's profitability and operational efficiency are strong, there has been a slight dip in liquidity measures, so ongoing appraisal is recommended to ensure comprehensive financial stability.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Fortinet (FTNT)

Company has a positive net income?

The first criterion of the Piotroski analysis checks if a company has a positive net income for the current year, which is a fundamental indicator of profitability.

In 2023, Fortinet (FTNT) has a reported net income of $1,147,800,000, which is positive. Compared to its historical performance, the company has shown a strong upward trajectory in net income over the past 20 years, starting from -$5,344,000 in 2006 to the current level in 2023. This positive trend indicates robust profitability and is favorable for this criterion. Hence, Fortinet scores 1 point for this aspect of the Piotroski analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's regular business operations. It is important as it indicates the firm's ability to generate sufficient cash to maintain and grow its operations without the need for external financing.

Based on the given data, Fortinet (FTNT) generated a positive CFO of $1,935,500,000 in 2023. This marks a significant upward trend from $3,409,000 in 2006 to the current figure, demonstrating robust operational efficiency and sustained growth. According to the Piotroski Score criteria, a positive CFO adds 1 point. Therefore, Fortinet earns 1 point under this metric, reflecting its exceptional capacity to generate cash from its core operations, a key indicator of financial health and operational success.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures how efficiently a company is using its assets to generate earnings. An increase in ROA is generally a positive sign of better company performance.

The ROA for Fortinet (FTNT) increased from 0.1412 in 2022 to 0.1702 in 2023, resulting in a point score of 1. This indicates improved efficiency in asset utilization. Additionally, operating cash flow for Fortinet has shown a steady increase from $3,409,000 in 2006 to $1,935,500,000 in 2023, reflecting strong operational performance. Comparatively, the industry's median ROA has generally remained higher than Fortinet's, with recent figures showing 0.715 in 2023. This suggests that while Fortinet is improving, the company still trails behind industry leaders in terms of asset efficiency.

Operating Cashflow are higher than Netincome?

Comparing Operating Cash Flow with Net Income is essential for evaluating the efficiency and sustainability of a company's earnings. A higher Operating Cash Flow indicates strong financial health as it shows that the company is efficient in generating cash from its core business operations.

In 2023, Fortinet (FTNT) reported an Operating Cash Flow of $1.935 billion and a Net Income of $1.148 billion. Since the Operating Cash Flow is higher than the Net Income, this criterion is met and earns a score of 1 point. This trend is favorable and encouraging. It demonstrates Fortinet's robust ability to generate cash from its operations, which is a positive indicator of financial health and liquidity. Over the last 20 years, Fortinet's Operating Cash Flow has followed a generally upward trajectory, suggesting strong operational competence and sound business practices. For example, in 2006, Operating Cash Flow stood at a mere $3.409 million; by 2023, it had soared to $1.935 billion, reflecting a strong consistent growth. This consistent performance is a testament to Fortinet's effective management and financial strategy. Furthermore, comparing the cash flow trends with Net Income over the same period shows how well earnings are converted to actual cash, which is critical for sustaining business operations and growth.

Liquidity of Fortinet (FTNT)

Leverage is declining?

Change in Leverage measures the variation in the ratio of total liabilities to total assets.

Analyzing the change in leverage for Fortinet (FTNT), we observe that the leverage ratio was 0.159 in 2022. By 2023, the leverage ratio decreased to 0.1367, indicating a reduction. From a Piotroski F-Score perspective, this positive trend in decreased leverage is favorable, suggesting improved financial health. Examining historical trends over the past 20 years, Fortinet consistently maintained minimal leverage until 2022, when it slightly increased to 0.167, before falling again in 2023. This indicates an overall strategy of low-risk financial leverage, enhancing the company's capability to manage debt efficiently without overburdening its balance sheet.

Current Ratio is growing?

Current ratio measures a company's ability to pay short-term obligations with its current assets. It is a key indicator of liquidity.

The current ratio for Fortinet (FTNT) declined from 1.2378 in 2022 to 1.1907 in 2023, indicating a slight reduction in liquidity. This trend is not favorable as it implies a decreased ability to cover short-term liabilities. As such, the score for this criterion is 0. Over the last 20 years, the current ratio for Fortinet has shown considerable fluctuation, peaking at 2.1087 in 2014 and generally outperforming the industry median until recent years. Nevertheless, the current trend invites scrutiny considering the industry's median of 1.5348 in 2023.

Number of shares not diluted?

A decrease in outstanding shares indicates that the company is conducting share buybacks, which can be a sign of strong financial health and confidence in future earnings.

The Outstanding Shares decreased from 791,400,000 in 2022 to 778,600,000 in 2023, indicating a reduction of 12,800,000 shares. This decrease earns Fortinet 1 point under the Piotroski Analyses criteria. Historically, Fortinet's outstanding shares have fluctuated over the last 20 years, with peaks in 2015 (880,705,000 shares) and 2016 (881,690,000 shares). The current decrease is a positive trend, showcasing management's commitment to enhancing shareholder value through buybacks. Share buybacks also lead to a reduction in the number of shares available in the market, potentially increasing earnings per share (EPS) and thus positively influencing stock prices.

Operating of Fortinet (FTNT)

Cross Margin is growing?

Gross Margin represents the percentage of revenue that exceeds the cost of goods sold. It indicates a company's financial health, pricing strategy, and cost management efficiency.

Fortinet's Gross Margin has increased from 0.7544 in 2022 to 0.7668 in 2023, which results in an additional 1 point according to Piotroski's analysis. The upward trend is favorable as it underscores enhancements in cost management and pricing strategies. Moreover, Fortinet's Gross Margin consistently outperforms the industry's median values across the last 20 years, suggesting exceptional operational efficiency and competitive positioning. In 2023, Fortinet's Gross Margin of 0.7668 significantly surpasses the industry median of 0.715, further cementing its market leadership. This positive momentum over two decades reaffirms the company's resilience and superior financial health.

Asset Turnover Ratio is growing?

The asset turnover ratio compares a company's sales to its assets, showing how efficiently a company uses its assets to generate sales.

Asset Turnover ratio presents a measure of how efficiently Fortinet is utilizing its assets to produce revenue. Comparing 2023 to 2022, the Asset Turnover increased from 0.7273 to 0.7867, reflecting a better use of assets. Historically, looking at data from 2006 to 2023, the ratio has seen substantial fluctuations with significant initial values but has settled in the more recent years. The improvement in 2023 contributes positively to operational efficiency, marking a scoring trend of 1 point for this criterion.