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Cybersecurity specialist Fortinet (NASDAQ: FTNT) hasn't been among the best performers on the stock market in the past three years with its 16% return lagging peers such as Palo Alto Networks and CrowdStrike Holdings by a wide margin. What's more, Fortinet stock has underperformed the S&P 500's 28% return over the same period.

The situation hasn't improved this year, either, as the cybersecurity company's growth has underwhelmed investors. However, a closer look at Fortinet's recent results suggests better times lie ahead for the company, and it could deliver stronger growth over the next three years.

Revenue pipeline points toward a brighter future

Fortinet's revenue in the first quarter of 2024 was up just 7% year over year to $1.35 billion. The company has been transitioning its business model from selling product licenses to subscriptions, and that's the main culprit for its slowing growth.

Data by YCharts.

More specifically, Fortinet's Q1 product revenue was down 18% year over year to $409 million. However, its service revenue increased an impressive 24% to $944 million. Sales of software licenses and services, which include cloud-based cybersecurity and software-as-a-service (SaaS) solutions, were up a solid 29% as well.

Fortinet has been targeting fast-growing niches within the cybersecurity industry such as secure access service edge (SASE) and security operations (SecOps), and it's already making good progress in these markets. Management pointed out that 24% of its billings came from SASE last quarter, while SecOps accounted for 9%. Additionally, Fortinet is also integrating generative artificial intelligence (AI) tools into its offerings, and this presents another lucrative opportunity for the company.

Thanks to these tailwinds, Fortinet believes its total addressable market (TAM) could be worth $222 billion in 2028, up from $144 billion this year. The company posted a 19% year-over-year increase in deferred revenue to $4.88 billion as well, outpacing its Q1 top-line growth by a nice margin. Deferred revenue is the money collected in advance for services that will be rendered at a future date, and faster growth for this metric is a bullish signal for Fortinet's revenue pipeline.

Stronger growth over the next three years could lead to more upside

Analysts are expecting Fortinet's revenue this year to increase just 9% to $5.8 billion. However, as you can see below, growth should accelerate to double-digit levels thereafter.

Data by YCharts.

The stock is currently trading at 8.6 times sales, a discount to its five-year average sales multiple of just over 11. Also, its sales multiple is almost in line with the U.S. technology sector's average of 8.1. Fortinet's earnings multiple of 38.9 is also lower than its five-year average of 59.5 and the technology sector's average price-to-earnings ratio of 48.

Assuming Fortinet indeed hits analysts' $7.5 billion revenue forecast in 2026 while trading at approximately 8 times sales, its market cap could hit $60 billion. That would be a 32% increase from current levels.

However, stronger growth cannot be ruled out considering that Fortinet is targeting fast-growing markets. Investors looking to add a cybersecurity stock to their portfolios would do well to buy Fortinet, while it still trades at attractive levels.

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike, Fortinet, and Palo Alto Networks. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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