FTNT vs. PANW: The Battle of the Tech Stock
Fortinet Inc. (FTNT) and Palo Alto Networks Inc. (PANW) are two California based network security companies providing services to both private and public sector entities. Both companies focus on providing their clients with hardware and software that provides security from pesky hackers attempting to disregard privacy laws.
Since Fortinet and Palo Alto Networks are competitors in the network security market, let’s examine which of the two stocks may be the more worthwhile investment to add to your portfolio.
Zacks Rankings
Palo Alto Networks beats Fortinet in the major Zacks Rankings figures. Palo Alto Networks holds a Zacks Rank #2 (Buy), compared to Fortinet’s Zacks Rank #3 (Hold) figure. Within the Communications Components industry, Palo Alto ranks 2nd out of 27 companies and Fortinet ranks 5th out of 11 companies in the Computer-Integrated Systems industry.
The Computer-Integrated Systems industry, however, is ranked in the top 13% in the Zacks Industry Rank compared to the Communications Components industry, which is in the top 35% in the Zacks Industry Rank.
Both companies have the same Style Scores. Palo Alto Networks and Fortinet hold growth, value, and momentum grades of ‘B,’ ‘F,’ and ‘F,’ respectively.
The battle of the Zacks Rankings goes to Palo Alto Networks. Despite the companies holding the same Style Scores and Fortinet’s industry having a higher Zacks Industry Rank, Palo Alto Networks ranks higher in its respective industry, which also has more companies listed than Fortinet, as well as having the better Zacks Rank than Fortinet.
Earnings
Of the past 10 quarters, Fortinet outperformed the Zacks Consensus Estimates 3 times, pushed 2 times, and failed to meet and beat the Zacks Consensus Estimates the remaining 5 times. Palo Alto Networks, on the contrary, has not outperformed, let alone pushed, on the Zacks Consensus Estimates in the past 10 quarters. For its latest earnings report, Fortinet beat projected earnings by 50% and Palo Alto Networks missed projected earnings by 155.55%.
The year-to-year change in the companies’ earnings totals confirms losses. Fortinet showed an -40% change in its EPS from its previous year’s earnings report, while Palo Alto Networks showed a -84% change in its EPS from its previous year’s earnings report.
Fortinet edges out Palo Alto Networks for the battle of the earnings. More often than not, both companies are not outperforming the Zacks Consensus Estimates, especially Palo Alto Network whom never beat earnings projections. Fortinet receives the victory due to the company beating estimates 3 times compared to Palo Alto Networks’ 0. With this being said, Palo Alto Networks will be reporting earnings in a few weeks and if severely outperforms the Zacks Consensus Estimates, will change the conclusion of this section.
Revenues
Fortinet and Palo Alto Networks both increased its revenues year-over-year in their latest quarterly earnings reports. Fortinet’s revenue for that quarter was $239.8 million with a 30% year-over year increase, compared to Palo Alto Networks’ company record $234.2 million and 55% year-over-year increase in revenue.
For the battle of the revenues, Palo Alto Networks beats out Fortinet. Since both companies are providing similar services in the same market, Palo Alto’s year-over-year percentage increase, along with its revenue totals, suggests that the company is growing at a faster rate than Fortinet.
Final Thoughts
By technically winning 2 of the 3 most important battles, Palo Alto Networks beats Fortinet in this tech stock head-to-head battle. Investors must be fully aware that Palo Alto Networks has not outperformed earnings estimates in the past 10 quarter. Even with this unsettling fact, Palo Alto Networks still has a change to outperform EPS estimates in a big way in the upcoming quarterly report in early September.
Fortinet appears to have hit a plateau with its earnings. Despite beating the Zacks Consensus Estimates 3 times in the last 10 quarters, its increase has never exceeded 50% and its EPS figure has never been above $0.10 in this 10 quarter span. Furthermore, Fortinet’s Forward PE figure of 234.84 on a stock price of roughly $47 per share; the value is not there.
If you are an investor concerned with companies outperforming earnings estimates, then neither of these two stocks may be worth considering. If you are an investor searching for companies in their growth stage, then Palo Alto Networks may be worth considering, since revenues are steadily increasing.
As long as the Internet, computers, and networks exist, cyber security will continue to be in demand. If Palo Alto Networks continues to provide quality service to its clients, then generating positive earnings figures will simply be a matter of time.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
PALO ALTO NETWK (PANW): Free Stock Analysis Report
FORTINET INC (FTNT): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
