FTNT $Fortinet(FTNT)$ has grown revenues at a 24% CAGR over the past 5 years and has an average profit margin of 18%. Assuming shares are repurchased uniformly throughout the year, over the last 3 years 91%, 12% and 116% of those profits were used to reduce the diluted share count ~3% per year.
If they can grow revenues at 20% over a decade, sustain their 18% profit margin and continue to distribute 70% of it through buybacks, applying a terminal multiple of 20 and discounting at 10% you get today's price of $57.
Are all your investments bets on sustained 20% growth in competitive sectors? I am not willing to bet on 20% growth.
What if they "only" grow at 15% and "only" 50% of profits can be deployed towards buybacks? Then, all else equal, we are already down to $35.
I don't know or care about what caused the shares to plummet 25% on Aug 4th: that is what you get whenever you are priced for explosive growth and you start showing signs that things might not be so explosive in the near term. I am not okay with that risk.
Sure, you can inflate the terminal multiple as much as you want in order to compensate for risks and focus on growth guesstimates and non-GAAP metrics to make things look cheaper.
I prefer to look at the business that is here now, at what cashflows it can distribute for me now, and if anything get the potential growth for free. Meta in 2018 or 2022 is a perfect example of what I mean.