FTNT is overvalued by ~45% vs fair value; wait for lower prices before buying.

Shares of companies like Fortinet and Palo Alto Networks have risen by more than 100% by 2026. Cybersecurity companies like Palo Alto Networks and Fortinet have already seen revenue growth over the past decade.

The spread of artificial intelligence has served as additional fuel for this growth. You can see that the revenue growth curve has accelerated recently since 2026.

Palo Alto Networks and Fortinet are among the largest cybersecurity companies in terms of revenue over the past twelve months.

The same applies to Fortinet, whose revenues have also increased nearly tenfold over the past decade to reach $7.5 billion. However, a key difference emerges when comparing the two companies in terms of operating profitability.

Looking at the operating profit margin since 2026, the two companies have diverged, with Palo Alto Networks' operating profit margin declining while Fortinet has achieved new record levels.

Furthermore, Fortinet 's operating profit margin is significantly higher than Palo Alto Networks' operating profit margin, and has remained so throughout the past decade. So, this is nothing new.

Fortinet 's operating profit margin reached 32.3%, nearly six times higher than in 2017. We obtain a similar profitability index when we measure these two companies based on investors' return on capital.

Fortinet delivers excellent returns on invested capital, and has maintained this level for most of the past four years. A rate of 99.84% is excellent and close to the best rates among the companies I currently follow.

It is natural for this level of sustainability to decrease. I do not expect Fortinet to achieve returns on invested capital close to 100% in the foreseeable future. However, a company like Fortinet can achieve a rate close to 40%.

Similarly, Fortinet also saw an increase in its revenue per employee, but Palo Alto Networks outperforms it in this aspect, although the growth rate of these numbers is excellent for both companies.

But when looking at profitability, such as operating profit margin and return on invested capital, Fortinet significantly outperformed Palo Alto Networks.

Similarly, Fortinet shares are trading near their highest level in years, at 46. Keep in mind that cybersecurity stocks are poised for a significant surge in 2026, with Palo Alto and Fortinet shares expected to rise by more than 100%.

I am excited about this because I have been optimistic about the cybersecurity industry for many years. You have heard me describe it as one of the industries I have been most optimistic about in recent years.

Therefore, I am pleased to see the industry performing well overall, as well as Fortinet and Palo Alto Networks, two stocks I have considered investment opportunities for several years.

As for Fortinet's stock, I calculated its fair value at $97. Compared to its current market price of $176, it appears to be overvalued by about 45%.

So, valuations have certainly risen considerably, with stock prices expected to climb in 2026. If it were up to me, I would postpone buying any cybersecurity stocks, or at least these two, until prices become more attractive.

However, if I had to choose between them, and if I had to choose one to buy now, I would choose Fortinet because it is the company with the most attractive valuation. I am impressed by the rapid growth of its revenues, with its profit margins reaching new record levels.