On July 27, 2023, Fortive Corp (FTV, Financial) recorded a slight daily gain of 0.6%, with an Earnings Per Share of 2.14. The question is: is this stock fairly valued? This article aims to provide an in-depth analysis of Fortive's valuation, exploring its financial health, profitability, and growth prospects. We invite you to read on for a comprehensive understanding of the company's value.
Company Overview
Fortive Corp (FTV, Financial) is a diversified industrial technology firm. It offers a broad portfolio of mission-critical products and services, including field solutions, product realization, health, and sensing technologies. Fortive serves a wide range of end markets, such as manufacturing, utilities, medical, and electronics. In 2022, the company generated approximately $5.8 billion in revenue and $1.4 billion in adjusted operating income. Fortive's current stock price is $77.2, and its market cap stands at $27.2 billion. According to the GF Value, the stock appears to be fairly valued at $83.25.
Understanding the GF Value
The GF Value is a proprietary valuation model that estimates a stock's intrinsic value based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to the GF Value calculation, Fortive (FTV, Financial) appears to be fairly valued. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength
Investing in companies with poor financial strength may lead to high risk of permanent capital loss. To avoid this, it's crucial to review a company’s financial health before purchasing shares. Fortive's cash-to-debt ratio of 0.22 ranks worse than 87.24% of companies in the Hardware industry. However, the overall financial strength of Fortive is 7 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is generally less risky. Fortive has been profitable for 10 years, with an operating margin of 17.49%, ranking better than 89.59% of companies in the Hardware industry. Overall, Fortive's profitability is ranked 8 out of 10, indicating strong profitability.
Growth is a critical factor in a company's valuation. The faster a company grows, the more likely it is to be creating value for shareholders, especially if the growth is profitable. Fortive's 3-year average annual revenue growth rate is 6.4%, ranking better than 56.89% of companies in the Hardware industry. Its 3-year average EBITDA growth rate is 18.2%, ranking better than 63.21% of companies in the Hardware industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) can also provide insights into its profitability. Over the past 12 months, Fortive’s ROIC was 6.03, while its WACC came in at 9.04.
Conclusion
Overall, Fortive (FTV, Financial) stock 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. For more information about Fortive stock, check out its 30-Year Financials here.
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