Financial Survey: Fortinet (NASDAQ:FTNT) and Zscaler (NASDAQ:ZS)

Fortinet (NASDAQ:FTNT) and Zscaler (NASDAQ:ZS) are both large-cap computer and technology companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, earnings, dividends, profitability, valuation and risk.

Earnings & Valuation

This table compares Fortinet and Zscaler”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Fortinet	$5.96 billion	13.23	$1.75 billion	$2.43	42.37
Zscaler	$2.17 billion	20.91	-$57.71 million	($0.26)	-1,119.77

Fortinet has higher revenue and earnings than Zscaler. Zscaler is trading at a lower price-to-earnings ratio than Fortinet, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Fortinet and Zscaler’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Fortinet	30.60%	148.79%	18.67%
Zscaler	-1.52%	-0.59%	-0.18%

Volatility and Risk

Fortinet has a beta of 1.06, suggesting that its stock price is 6% more volatile than the S&P 500. Comparatively, Zscaler has a beta of 1.11, suggesting that its stock price is 11% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Fortinet and Zscaler, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Fortinet	1	20	11	2	2.41
Zscaler	0	8	28	1	2.81

Fortinet currently has a consensus target price of $106.14, indicating a potential upside of 3.08%. Zscaler has a consensus target price of $296.82, indicating a potential upside of 1.95%. Given Fortinet’s higher possible upside, equities analysts clearly believe Fortinet is more favorable than Zscaler.

Institutional and Insider Ownership

83.7% of Fortinet shares are held by institutional investors. Comparatively, 46.5% of Zscaler shares are held by institutional investors. 18.0% of Fortinet shares are held by insiders. Comparatively, 18.1% of Zscaler shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Fortinet beats Zscaler on 10 of the 15 factors compared between the two stocks.

About Fortinet

Fortinet, Inc. provides cybersecurity and convergence of networking and security solutions worldwide. It offers secure networking solutions focus on the convergence of networking and security; network firewall solutions that consist of FortiGate data centers, hyperscale, and distributed firewalls, as well as encrypted applications; wireless LAN solutions; and secure connectivity solutions, including FortiSwitch secure ethernet switches, FortiAP wireless local area network access points, FortiExtender 5G connectivity gateways, and other products. The company also provides the Fortinet Unified SASE solutions that include firewall, SD-WAN, Secure web gateway, cloud access services broker, data loss prevention, zero trust network access, and cloud security, including web application firewalls, virtualized firewalls, and cloud-native firewalls. In addition, it offers security operations solutions comprising FortiAI generative AI assistant, FortiSIEM security information and event management, FortiSOAR security orchestration, automation and response, FortiEDR endpoint detection and response, FortiXDR extended detection and response, FortiMDR managed detection and response service, FortiNDR network detection and response, FortiRecon digital risk protection, FortiDeceptor deception technology, FortiGuard SoCaaS, FortiSandbox sandboxing, FortiGuard incident response, and other products. Further, the company offers FortiGuard security services consisting of FortiGuard application security, content security, device security, NOC/SOC security, and web security services; FortiCare technical support services; and training services to customers and channel partners, as well as operates a FortiGuard Lab, a cybersecurity threat intelligence and research organization. It serves enterprise, communication and security service providers, government organizations, and small and medium-sized businesses. The company was incorporated in 2000 and is headquartered in Sunnyvale, California.

About Zscaler

Zscaler, Inc. operates as a cloud security company worldwide. The company offers Zscaler Internet Access solution that provides users, workloads, IoT, and OT devices secure access to externally managed applications, including software-as-a-service (SaaS) applications and internet destinations; and Zscaler Private Access solution, which is designed to provide access to managed applications hosted internally in data centers, and private or public clouds. It also provides Zscaler Digital Experience that measures end-to-end user experience across business applications, as well as provides an easy-to-understand digital experience score for each user, application, and location within an enterprise. In addition, the company offers Posture Control solutions comprising Cloud Security Posture Management that identifies and remediates application misconfigurations in SaaS, infrastructure as a service, and PaaS to reduce risk and ensure compliance with industry and organizational benchmarks; Cloud Infrastructure Entitlement Management that detects and remediates excessive or unused cloud permissions and enforces least privileged access without disrupting productivity; Infrastructure as Code (IaC), which analyzes IaC templates to identify misconfigurations and other security issues prior to deployment to cloud infrastructure; and Vulnerability Scanning and Data Loss Prevention solutions. Its platform modules include Zscaler Central Authority, Zscaler Enforcement Node, and Zscaler Log Servers. The company serves customers in airlines and transportation, conglomerates, consumer goods and retail, financial services, healthcare, manufacturing, media and communications, public sector and education, technology, and telecommunications services industries. The company was formerly known as SafeChannel, Inc., and changed its name to Zscaler, Inc. in August 2008. Zscaler, Inc. was incorporated in 2007 and is headquartered in San Jose, California.