A Look At Veralto’s (VLTO) Valuation After A Modest Q4 Revenue Miss And Steady Recurring Revenue Base

Veralto (VLTO) is back in focus after fourth quarter revenue came in slightly below Wall Street expectations. Management pointed to fewer shipping days and softer industrial and municipal demand as key factors.

See our latest analysis for Veralto.

Those earnings and M&A comments landed against a weaker tape, with the latest share price at $91.98 and a 30 day share price return of 9.62% decline, adding to a 1 year total shareholder return of 7.37% decline. This suggests momentum has cooled as investors reassess growth prospects and risk.

If this mix of earnings noise and M&A plans has you thinking about where else to look, our screener of 23 top founder-led companies is a useful way to uncover other potential ideas.

With Q4 revenue noise, an active M&A pipeline, and the stock trading below some analyst targets, is Veralto now quietly on sale, or is the current price already factoring in its next leg of growth?

Most Popular Narrative: 16.8% Undervalued

Veralto's most followed narrative places fair value at about $110.59 versus the recent $91.98 share price, framing the current weakness against a higher long run view.

Increased adoption of digital workflow and connected software solutions (notably in PQI and Water Quality) is supporting high margin, recurring revenue streams (now 61% of total sales), improving business predictability and supporting higher net margins and EPS growth.

Read the complete narrative.

Want to see what kind of revenue mix and profit profile that 61% recurring base is meant to support, and how earnings and valuation are modeled around it? The most followed narrative lays out a detailed path that connects revenue growth, margin expansion, and a premium future earnings multiple to arrive at that fair value line. Result: Fair Value of $110.59 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, that story can change quickly if China keeps “bouncing along the bottom” in Water Quality, or if inflation and integration costs squeeze margins harder than expected.

Find out about the key risks to this Veralto narrative.

Build Your Own Veralto Narrative

If you see the numbers differently or want to stress test your own assumptions, you can build a custom Veralto view in just a few minutes: Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Veralto.

Looking for more investment ideas?

If Veralto has your attention, do not stop here. Use the Simply Wall Street Screener to quickly size up other opportunities that might fit your style.

• Target resilient compounding potential by scanning companies with strong fundamentals through our solid balance sheet and fundamentals stocks screener (45 results).
• Hunt for value focused opportunities using our 55 high quality undervalued stocks to spot companies trading at prices that may not fully reflect their fundamentals.
• Lock in potential cash flow today by checking out our 16 dividend fortresses that highlights companies with higher yielding payouts.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com