The Highest Score in the Room

Nothing about Fortinet is flashy. The company sells network security: firewalls at every size from branch office to data center, increasingly bundled with the subscription services that sit on top of them.

It's a business with a quality that markets tend to underrate — the spending is not optional. Companies defer server upgrades in a bad year. They do not, as a rule, decide to try going without firewalls, and the reward for an installed hardware base is that it comes due for replacement on a schedule.

Fundamentals

Revenue up 26% year over year, net margins around 28%, and the recurring services attach growing as the installed base turns over. The price for all this is about 57 times trailing earnings and 43 times forward, which is the going rate for security franchises and leaves the usual amount of room for disappointment, which is none. A missed quarter at this multiple is a 20% day; the stock has had them before.

Technicals

Roughly a double over the past year — $75 at the low, $168 at the high — and currently sitting around $160, within a few percent of the top of that range. It has held that level through the week.