Fortive Corp (FTV, Financial) experienced a daily loss of 1.94%, but over a three-month period, it gained 15.47%. The company's Earnings Per Share (EPS) stands at 2.25. The question at hand is, is Fortive fairly valued? This article presents a comprehensive valuation analysis of Fortive (FTV). Read on to unravel the intrinsic value of this stock.
Fortive is a diversified industrial technology firm with a broad portfolio of mission-critical products and services that include field solutions, product realization, health, and sensing technologies. The company serves a wide range of end markets, including manufacturing, utilities, medical, and electronics. In 2022, Fortive generated roughly $5.8 billion in revenue and $1.4 billion in adjusted operating income.
Understanding GF Value
The GF Value represents the current intrinsic value of a stock derived from our exclusive method. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at. It is calculated based on three factors:
- Historical multiples (PE Ratio, PS Ratio, PB Ratio and Price-to-Free-Cash-Flow) that the stock has traded at.
- GuruFocus adjustment factor based on the company's past returns and growth.
- Future estimates of the business performance.
Using this method, the GF Value of Fortive (FTV, Financial) is estimated at $78.76. Considering its current price of $75.88 per share, Fortive stock appears to be fairly valued. This implies that the long-term return of its stock is likely to be close to the rate of its business growth.
Evaluating Fortive's Financial Strength
Companies with poor financial strength offer investors a high risk of permanent capital loss. To mitigate this risk, investors must review a company's financial strength before purchasing shares. Fortive's cash-to-debt ratio of 0.24 ranks worse than 85.91% of companies in the Hardware industry. However, the overall financial strength of Fortive is 7 out of 10, indicating fair financial strength.
Profitability and Growth of Fortive
Investing in profitable companies carries less risk, especially in companies that have demonstrated consistent profitability over the long term. Fortive has been profitable 10 years over the past 10 years. During the past 12 months, the company had revenues of $6 billion and Earnings Per Share (EPS) of $2.25. Its operating margin of 18.02% is better than 90.7% of companies in the Hardware industry. Overall, GuruFocus ranks Fortive's profitability as strong.
Growth is another essential factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth rate of Fortive is 6.4%, which ranks better than 56.77% of companies in the Hardware industry. The 3-year average EBITDA growth rate is 18.2%, which ranks better than 63.21% of companies in the Hardware industry.
Return on Invested Capital (ROIC) vs Weighted Average Cost of Capital (WACC)
One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. During the past 12 months, Fortive's ROIC is 6.33 while its WACC came in at 9.55.
In conclusion, the stock of Fortive (FTV, Financial) appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 63.21% of companies in the Hardware industry. To learn more about Fortive stock, you can check out its 30-Year Financials here.
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