Fortinet vs industry peers is one of the most useful exercises an investor can run before deciding whether FTNT deserves a premium valuation. By comparing revenue growth, operating margins, valuation multiples, and return on invested capital across Fortinet's closest competitors, you get a clearer picture of where the company leads, where it lags, and whether the market's pricing makes sense. This kind of peer group comparison turns a single-stock thesis into a grounded, relative assessment.
Key takeaways
- Fortinet's peer group typically includes Palo Alto Networks (PANW), CrowdStrike (CRWD), Check Point Software (CHKP), and sometimes Cisco's security segment or Zscaler (ZS).
- Revenue growth, operating margins, valuation multiples, and ROIC are the four dimensions that matter most in a cybersecurity peer comparison.
- High growth doesn't always justify a high multiple. Pairing growth with profitability metrics gives a more honest picture.
- Fortinet's hardware-plus-subscription model creates a margin profile that differs meaningfully from pure-play software peers.
- Running your own FTNT industry comparison with real-time data is more useful than relying on any static analysis.
Who belongs in the Fortinet peer group?
Before you compare anything, you need the right comparison set. The Fortinet peer group should include companies that compete directly for the same enterprise security budgets and that investors might consider as alternatives in a portfolio. The most commonly cited peers are Palo Alto Networks, CrowdStrike, Check Point Software, and Zscaler. Each overlaps with Fortinet in different ways.
Palo Alto Networks is the closest comp. Both companies sell network security appliances and have been shifting toward platform-based subscription models. CrowdStrike competes more in endpoint and cloud security, but the two increasingly collide as Fortinet expands its security fabric approach. Check Point is the legacy peer, a profitable, slower-growth firewall vendor that offers a useful contrast. Zscaler represents the cloud-native end of the spectrum, competing on secure access rather than hardware-based firewalls.
The peer set you choose matters. Including only high-growth names makes Fortinet look slower. Including only legacy names makes it look fast. A balanced FTNT vs sector comparison needs both.
Peer group: A set of publicly traded companies that operate in the same industry, compete for similar customers, and have comparable business models. Investors use peer groups to benchmark financial performance and valuation rather than evaluating a stock in isolation.
How does Fortinet compare on revenue growth?
Revenue growth is usually the first dimension investors check, and it's where the cybersecurity peer group shows the widest spread. CrowdStrike and Zscaler have historically posted the fastest top-line growth, often in the 30-50% range during their high-growth phases. Palo Alto Networks has grown in the mid-to-high teens to low twenties. Fortinet has typically landed somewhere in between, with growth rates that fluctuate depending on product refresh cycles and the mix of hardware versus subscription revenue. Check Point tends to sit at the bottom, with single-digit growth that reflects a mature installed base.
Here's the thing about revenue growth in this sector: the subscription transition distorts the numbers. When Fortinet or Palo Alto shifts customers from one-time appliance purchases to recurring subscriptions, reported revenue can temporarily slow even as the underlying business strengthens. You need to look at billings growth or annual recurring revenue alongside reported revenue to get an accurate read.
A useful framework is to track a three-year compound annual growth rate rather than any single period. This smooths out quarterly noise and gives a better sense of trajectory. You can pull this data for Fortinet's stock page and compare it against peers.
Operating margins: Where Fortinet stands out
This is where the FTNT industry comparison gets interesting. Fortinet has consistently been one of the most profitable companies in cybersecurity, with operating margins that have historically ranged from the mid-twenties to above 30%. That puts it well ahead of CrowdStrike and Zscaler, which have been investing heavily in growth and only recently approached or crossed into sustained profitability. Palo Alto Networks has improved its margins over time but has gone through periods of margin compression during its own platform transition. Check Point, on the other hand, runs operating margins in the 35-40% range, though at the cost of slower growth.
Fortinet's margin advantage comes partly from its custom ASIC chips, which it designs in-house for its FortiGate appliances. This vertical integration reduces hardware costs and creates a structural edge that pure software competitors don't have (and don't need, since they don't sell hardware). It also means Fortinet's margin story is fundamentally different from a company like CrowdStrike, where margins scale with software delivery economics.
When comparing margins across the peer group, separate operating margin from free cash flow margin. Some companies with lower operating margins generate strong free cash flow because of favorable working capital dynamics or deferred revenue structures. Both metrics matter, but they tell different stories.
Operating margin: Operating income divided by revenue, expressed as a percentage. It measures how much profit a company keeps from each dollar of revenue after covering operating expenses but before interest and taxes. Higher operating margins generally indicate stronger pricing power or better cost control.
What do valuation multiples tell us about FTNT vs sector pricing?
Valuation is where opinions diverge. Cybersecurity stocks typically trade at premium multiples relative to the broader market because of strong secular tailwinds, recurring revenue models, and high gross margins. But within the sector, there's a wide range. CrowdStrike and Zscaler have historically commanded the highest forward revenue multiples, often trading at 15-25x forward sales during peak optimism. Palo Alto Networks usually trades at a modest discount to those two. Fortinet tends to trade somewhere in the middle of the pack. Check Point trades at the lowest multiples, often in the 4-7x range.
The question for investors is whether Fortinet's multiple reflects its actual position accurately. If FTNT grows faster than Check Point but trades at a similar multiple, that might signal undervaluation. If it grows slower than CrowdStrike but trades at a comparable multiple, the market might be giving it too much credit.
Two ratios are particularly useful here:
- EV/Revenue (forward): The broadest valuation metric for high-growth companies. Compare this across the peer group to see relative pricing.
- PEG ratio: Price-to-earnings divided by expected earnings growth rate. This adjusts for growth speed and can reveal whether a "cheap" stock is cheap for a reason or whether an "expensive" stock is actually reasonably priced for its growth.
No single multiple gives you the answer. The point of running this Fortinet vs industry peers comparison on valuation is to identify mismatches. If one company trades at a significantly higher or lower multiple than its growth and profitability suggest, that's worth investigating further. You can explore valuation data and compare it against peers using the Rallies Vibe Screener.
Return on invested capital: The efficiency test
ROIC is the metric that separates good businesses from great ones, and it's underused in most cybersecurity analysis. Return on invested capital measures how effectively a company turns its invested capital (equity plus debt, minus excess cash) into operating profits. A company can grow fast and still destroy value if its ROIC sits below its cost of capital.
Fortinet has historically posted strong ROIC figures, often well above 20%, which reflects both its high margins and its relatively capital-light model. The custom ASIC approach requires upfront R&D investment, but once designed, those chips scale efficiently across millions of appliances. CrowdStrike's ROIC has improved as the company has scaled and turned profitable, but it spent years reinvesting aggressively. Check Point's ROIC is high in absolute terms, driven by its mature, low-investment business. Palo Alto Networks falls somewhere in the middle, with ROIC that has improved alongside its margin expansion.
Return on invested capital (ROIC): A measure of how efficiently a company generates profit from its total invested capital. Calculated as net operating profit after tax divided by invested capital. An ROIC above a company's weighted average cost of capital indicates value creation.
When comparing ROIC across the Fortinet peer group, look at the trend over three to five years, not just a single snapshot. A rising ROIC paired with moderate growth is often a better sign than sky-high revenue growth with flat or declining ROIC. It means the company is getting more efficient as it scales.
How to build your own Fortinet peer group comparison
Running this analysis yourself is more valuable than reading anyone else's conclusions, because the numbers change and so does your investment context. Here's a straightforward process:
- Select three to four peers. Start with Palo Alto Networks, CrowdStrike, Check Point, and optionally Zscaler. Adjust based on what you're actually evaluating. If you're focused on network security specifically, drop Zscaler. If you want the full cybersecurity landscape, keep it.
- Pull the four core metrics. Revenue growth (trailing twelve months and three-year CAGR), operating margin, forward EV/revenue or P/E, and ROIC. You can get these from company filings or tools like the Rallies AI Research Assistant.
- Normalize for business model differences. Fortinet sells hardware and software. CrowdStrike is pure SaaS. These differences affect gross margins, revenue recognition, and capital intensity. Don't compare raw numbers without context.
- Look for mismatches. The goal isn't to find the "best" company. It's to find cases where the market's valuation doesn't match the fundamentals. A company trading at a premium to peers with inferior growth and margins is worth questioning.
- Revisit quarterly. Peer comparisons aren't static. A single earnings report can shift the relative picture meaningfully.
This framework works for any industry, not just cybersecurity. The specific metrics might change (you'd swap in dividend yield for a utilities comparison, for example), but the logic is the same: benchmark, normalize, and look for gaps.
Common mistakes in FTNT industry comparison
A few pitfalls come up repeatedly when investors compare Fortinet to its peers:
- Ignoring the hardware component. Fortinet's gross margins will almost always look lower than CrowdStrike's because hardware carries lower margins than pure software. That doesn't mean Fortinet is a worse business. It means the business model is different.
- Comparing only one metric. A company can look cheap on P/E and expensive on EV/revenue, or vice versa. Multiples need context. Growth and profitability have to be part of the equation.
- Anchoring to a single year. One strong quarter doesn't change a company's structural position. Use multi-year averages for growth and margins to avoid recency bias.
- Forgetting balance sheet strength. Net cash positions, debt levels, and share buyback activity can all affect how attractively a stock is priced. Two companies with identical earnings multiples can look very different once you account for their balance sheets.
For more on how to evaluate individual companies across these dimensions, the stock analysis resource hub walks through common frameworks and approaches.
Try it yourself
Want to run this kind of analysis on your own? Copy any of these prompts and paste them into the Rallies AI Research Assistant:
- Compare Fortinet to its 3-4 closest competitors on revenue growth, operating margins, valuation multiples, and return on invested capital — which companies are in the peer group, and where does FTNT stand out or fall behind?
- How does Fortinet stack up against 3-4 industry peers on the metrics that matter most?
- What's Fortinet's ROIC trend over the past five years, and how does it compare to Palo Alto Networks and CrowdStrike?
Frequently asked questions
What companies are in the Fortinet peer group?
The most common Fortinet peer group includes Palo Alto Networks (PANW), CrowdStrike (CRWD), Check Point Software (CHKP), and Zscaler (ZS). These companies compete across overlapping segments of the cybersecurity market, from network firewalls to endpoint protection to cloud security. The specific peers you choose should depend on which part of Fortinet's business you're analyzing.
How does FTNT vs sector valuation typically compare?
Fortinet generally trades at a valuation multiple somewhere in the middle of the cybersecurity sector. It tends to command a premium over slower-growth peers like Check Point but trades at a discount to the highest-growth names like CrowdStrike and Zscaler. The exact spread depends on the market environment and Fortinet's most recent growth trajectory.
Why does Fortinet have higher operating margins than some peers?
Fortinet designs custom ASIC chips for its security appliances, which reduces hardware costs and gives the company a structural margin advantage in its appliance business. Combined with a growing base of high-margin subscription and support revenue, this model has consistently produced operating margins in the mid-twenties to low thirties, ahead of peers still investing heavily for growth.
What is ROIC and why does it matter for FTNT industry comparison?
ROIC, or return on invested capital, measures how efficiently a company converts its capital into profits. For a Fortinet peer comparison, ROIC helps distinguish between companies that grow efficiently and those that spend heavily to achieve growth. A consistently high ROIC suggests the business creates value, not just revenue.
Is Fortinet a good investment compared to its peers?
That depends on your investment criteria, risk tolerance, and time horizon. A peer comparison on growth, margins, valuation, and ROIC can help you form your own view, but it doesn't produce a single "buy" or "don't buy" answer. Consider consulting with a qualified financial advisor and doing your own research before making any decisions.
How often should I update a peer group comparison?
At minimum, revisit peer comparisons after each company reports quarterly earnings, since one quarter's results can shift growth rates, margins, and valuations meaningfully. Many investors also update their comparison when a major product launch, acquisition, or strategic shift changes the competitive dynamics within the peer group.
Where can I find data for an FTNT vs sector comparison?
Company filings (10-Ks and 10-Qs) are the primary source for revenue, operating income, and invested capital data. For valuation multiples and screening across peers, tools like the Rallies Vibe Screener let you filter and compare stocks side by side. You can also ask the Rallies AI Research Assistant to pull and summarize peer data for you.
Bottom line
A Fortinet vs industry peers comparison on revenue growth, operating margins, valuation multiples, and ROIC gives you a structured way to evaluate whether FTNT's market pricing makes sense relative to its fundamentals. Fortinet's margin profile and capital efficiency stand out in the cybersecurity sector, but growth speed and valuation premiums vary meaningfully across the peer group. The exercise works best when you do it yourself with current data rather than relying on static conclusions.
To go deeper on how to analyze individual stocks and compare them against peers, explore the stock analysis guides on Rallies.ai for frameworks you can apply to any company in your portfolio.
Disclaimer: This article is for educational and informational purposes only. It does not constitute investment advice, financial advice, trading advice, or any other type of advice. Rallies.ai does not recommend that any security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. All investments involve risk, including the possible loss of principal. Past performance does not guarantee future results. Before making any investment decision, consult with a qualified financial advisor and conduct your own research.
Written by Gav Blaxberg, CEO of WOLF Financial and Co-Founder of Rallies.ai.