Stock Analysis on Net

Fortinet Inc. (NASDAQ:FTNT)

This company has been moved to the archive! The financial data has not been updated since May 8, 2023.

Present Value of Free Cash Flow to Equity (FCFE)

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Intrinsic Stock Value (Valuation Summary)

Fortinet Inc., free cash flow to equity (FCFE) forecast

US$ in thousands, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 15.08%
01 FCFE0 1,449,400
1 FCFE1 2,177,951 = 1,449,400 × (1 + 50.27%) 1,892,522
2 FCFE2 3,064,113 = 2,177,951 × (1 + 40.69%) 2,313,613
3 FCFE3 4,017,361 = 3,064,113 × (1 + 31.11%) 2,635,845
4 FCFE4 4,882,391 = 4,017,361 × (1 + 21.53%) 2,783,585
5 FCFE5 5,466,057 = 4,882,391 × (1 + 11.95%) 2,707,940
5 Terminal value (TV5) 195,674,443 = 5,466,057 × (1 + 11.95%) ÷ (15.08%11.95%) 96,939,114
Intrinsic value of Fortinet Inc. common stock 109,272,620
 
Intrinsic value of Fortinet Inc. common stock (per share) $139.17
Current share price $66.08

Based on: 10-K (reporting date: 2022-12-31).

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.68%
Expected rate of return on market portfolio2 E(RM) 13.78%
Systematic risk of Fortinet Inc. common stock βFTNT 1.14
 
Required rate of return on Fortinet Inc. common stock3 rFTNT 15.08%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rFTNT = RF + βFTNT [E(RM) – RF]
= 4.68% + 1.14 [13.78%4.68%]
= 15.08%


FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Fortinet Inc., PRAT model

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Average Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018
Selected Financial Data (US$ in thousands)
Net income attributable to Fortinet, Inc. 857,300 606,800 488,500 326,500 332,200
Revenue 4,417,400 3,342,200 2,594,400 2,156,200 1,801,200
Total assets 6,228,000 5,919,100 4,044,500 3,885,500 3,078,000
Total Fortinet, Inc. stockholders’ equity (deficit) (281,600) 781,700 856,000 1,321,900 1,010,200
Financial Ratios
Retention rate1 1.00 1.00 1.00 1.00 1.00
Profit margin2 19.41% 18.16% 18.83% 15.14% 18.44%
Asset turnover3 0.71 0.56 0.64 0.55 0.59
Financial leverage4 7.57 4.72 2.94 3.05
Averages
Retention rate 1.00
Profit margin 18.00%
Asset turnover 0.61
Financial leverage 4.57
 
FCFE growth rate (g)5 50.27%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

1 Company does not pay dividends

2 Profit margin = 100 × Net income attributable to Fortinet, Inc. ÷ Revenue
= 100 × 857,300 ÷ 4,417,400
= 19.41%

3 Asset turnover = Revenue ÷ Total assets
= 4,417,400 ÷ 6,228,000
= 0.71

4 Financial leverage = Total assets ÷ Total Fortinet, Inc. stockholders’ equity (deficit)
= 6,228,000 ÷ -281,600
=

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 1.00 × 18.00% × 0.61 × 4.57
= 50.27%


FCFE growth rate (g) implied by single-stage model

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (51,885,762 × 15.08%1,449,400) ÷ (51,885,762 + 1,449,400)
= 11.95%

where:
Equity market value0 = current market value of Fortinet Inc. common stock (US$ in thousands)
FCFE0 = the last year Fortinet Inc. free cash flow to equity (US$ in thousands)
r = required rate of return on Fortinet Inc. common stock


FCFE growth rate (g) forecast

Fortinet Inc., H-model

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Year Value gt
1 g1 50.27%
2 g2 40.69%
3 g3 31.11%
4 g4 21.53%
5 and thereafter g5 11.95%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 50.27% + (11.95%50.27%) × (2 – 1) ÷ (5 – 1)
= 40.69%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 50.27% + (11.95%50.27%) × (3 – 1) ÷ (5 – 1)
= 31.11%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 50.27% + (11.95%50.27%) × (4 – 1) ÷ (5 – 1)
= 21.53%