It's been a great afternoon session for Fortive investors, who saw their shares rise 1.8% to a price of $72.95 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
a Lower P/B Ratio Than Its Sector Average but Its Shares Are Expensive:
Fortive Corporation designs, develops, manufactures, and services professional and engineered products, software, and services in the United States, China, and internationally. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 25.19 and an average price to book (P/B) ratio of 3.17. In contrast, Fortive has a trailing 12 month P/E ratio of 29.3 and a P/B ratio of 2.43.
Fortive's PEG ratio is 2.32, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
Wider Gross Margins Than the Industry Average of 34.68%:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,800 | $4,564 | $4,634 | $5,255 | $5,826 | $6,065 |
| Gross Margins | 57% | 54% | 56% | 56% | 57% | 59% |
| Net Margins | 77% | 16% | 35% | 12% | 13% | 14% |
| Net Income (M) | $2,914 | $739 | $1,613 | $608 | $755 | $866 |
| Net Interest Expense (M) | $77 | $143 | $148 | $103 | $98 | $124 |
| Depreciation & Amort. (M) | $70 | $80 | $74 | $75 | $84 | $86 |
| Diluted Shares (M) | 351 | 340 | 359 | 352 | 361 | 356 |
| Earnings Per Share | $8.21 | $1.97 | $4.49 | $1.63 | $2.1 | $2.43 |
| EPS Growth | n/a | -76.0% | 127.92% | -63.7% | 28.83% | 15.71% |
| Avg. Price | $62.95 | $62.59 | $58.94 | $71.38 | $61.55 | $73.03 |
| P/E Ratio | 7.56 | 31.45 | 12.87 | 43.52 | 29.03 | 29.69 |
| Free Cash Flow (M) | $1,274 | $1,197 | $1,361 | $911 | $1,207 | $1,246 |
| CAPEX (M) | $70 | $74 | $76 | $50 | $96 | $108 |
| EV / EBITDA | 34.43 | 52.57 | 38.52 | 33.15 | 23.94 | 22.58 |
| Total Debt (M) | $3,886 | $7,826 | $5,630 | $6,111 | $4,251 | $3,646 |
| Net Debt / EBITDA | 3.79 | 12.63 | 6.2 | 5.96 | 3.31 | 1.44 |
| Current Ratio | 1.45 | 1.06 | 1.55 | 0.68 | 0.91 | 2.05 |
Fortive has growing revenues and increasing reinvestment in the business and an excellent current ratio of 2.05. Additionally, the company's financial statements display wider gross margins than its peer group and generally positive cash flows. However, the firm suffers from declining EPS growth and a highly leveraged balance sheet.
