Is Fortive Fairly Priced After Share Price Surge and Acquisition Buzz?

• Ever wondered if Fortive's current share price is a bargain or a trap? You're not alone. We're about to unpack what really matters for investors looking for value.
• After a rough start to the year, Fortive has seen its stock bounce back with a 5.6% rise over the past week and a 7.6% gain in the past month, even as the year-to-date return remains sharply negative at -28.5%.
• These price swings have come on the back of expanded M&A activity in the industrial tech sector, with speculation swirling that Fortive may be gearing up for strategic acquisitions. Headlines have also spotlighted management's renewed focus on operational efficiencies, fueling investor hopes for a turnaround.
• Right now, Fortive scores a 2 out of 6 on our value check. Only two valuation metrics suggest the stock is undervalued. We will break down how different valuation methods stack up next, and introduce an additional way to look at value by the end of this article.

Fortive scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Fortive Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates a company's intrinsic value by forecasting its future cash flows and then discounting those projected amounts back to the present using a required rate of return. This approach aims to determine what a business is truly worth today, based on its ability to generate cash in the years ahead.

For Fortive, the DCF analysis starts with a current free cash flow of $1.09 billion. According to consensus analyst forecasts, free cash flow trends slightly downward in the near term, reaching a projected $1.04 billion by 2028. After analysts’ coverage ends, Simply Wall St extrapolates further growth and estimates free cash flow to rise to about $1.23 billion by 2035.

Using these projections and discounting them to today's dollars, the model calculates Fortive’s fair intrinsic value per share at $52.71. In comparison, the current market price is just about 1% above this value. This suggests the stock is considered to be very close to its underlying worth and is not offering a significant bargain or risk.

Result: ABOUT RIGHT

Fortive is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Fortive.

Approach 2: Fortive Price vs Earnings

For profitable companies like Fortive, the Price-to-Earnings (PE) ratio is often the go-to metric for stock valuation. This indicator helps investors see how much they are paying for each dollar of current earnings, making it a useful benchmark, especially for established businesses generating consistent profits.

The “right” PE ratio depends on several factors. Companies with higher expected growth rates and lower business risks usually command higher PE multiples, while slower-growing or riskier firms trade at lower ones. This is why comparing a company’s PE ratio to both its peers and industry averages provides important context.

Currently, Fortive is trading at a PE ratio of 19.1x. For perspective, this is noticeably below the average for the Machinery industry of 24.8x and also trails the peer group average of 25.2x. At first glance, this might suggest the stock is undervalued relative to others in its space.

But industry and peer averages do not always tell the whole story. Simply Wall St's Fair Ratio, which is 18.8x for Fortive, goes a step further by tailoring expectations to the company’s unique mix of earnings growth, risk, profit margins, sector conditions, and market cap. This proprietary metric is more comprehensive than standard comparisons, as it accounts for company-specific nuances that can materially affect what a fair multiple should be.

With Fortive’s current PE ratio (19.1x) sitting almost exactly in line with its Fair Ratio (18.8x), the evidence suggests that the stock price is pretty well aligned with its fundamentals.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Fortive Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personal story, connecting what you believe about a company’s future, such as expected sales, profit margins, and risks, to a financial forecast and, ultimately, to your estimate of fair value.

Narratives bring numbers to life by letting you specify not just your assumptions about growth and earnings, but why you believe them. This links the company’s story to concrete financial outcomes. On Simply Wall St’s Community page, investors of all backgrounds can easily write, share, and update Narratives, providing a dynamic tool used by millions to translate big-picture thinking into actionable numbers.

These Narratives help you decide when to buy or sell by putting your projected Fair Value beside the current Price, and automatically keep you up-to-date as new earnings reports or news hit the market. This way, your view stays relevant.

For example, with Fortive, one Narrative might lay out a bullish view: “Ongoing digital transformation and recurring revenues could support rising margins,” resulting in a $116 price target. Another Narrative might focus on margin challenges and trade headwinds, setting fair value closer to $50. Narratives let you compare your view to others and make decisions that truly fit your conviction.

Do you think there's more to the story for Fortive? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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