Cybersecurity stock Fortinet’s (FTNT) stretched valuations and relatively low profit margin make it best avoided now. However, given the industry’s immense growth potential—with increasing cyber threats in the digital era—we think competitors NortonLifeLock (NASDAQ:NLOK), Check Point (CHKP), and Radware (NASDAQ:RDWR) are well positioned to outperform FTNT in the coming months.Shares of popular cybersecurity solutions provider Fortinet , Inc. (NASDAQ:FTNT) have gained significantly over the past year, driven by investor optimism about the growth prospects of the cybersecurity industry in the digital era. However, the company’s relatively low profitability versus its peers and stock price overvaluation make it susceptible to a pullback. FTNT’s 12.40x forward EV/Sales is 190.9% higher than the 4.26x industry average Also, the company’s 10.9% levered free cash flow margin is 63.9% below the 30.1% industry average. Wall Street analysts expect FTNT to witness an 11.3% decline in the near-term. Therefore, we think FTNT is best avoided now.
However, with the adoption of hybrid working models and large-scale digitization, the demand for cybersecurity solutions is increasing rapidly. Indeed, the global cybersecurity market size is expected to grow at a 12.5% CAGR to hit $418.30 billion by 2028.
Given this backdrop, we believe it is wise to invest in fundamentally sound cybersecurity stocks NortonLifeLock Inc. (NLOK), Check Point Software Technologies Ltd. (NASDAQ:CHKP), and Radware Ltd. (RDWR). They are well-positioned to perform much better than FTNT in the near term.