Fortive (FTV) Stock Looks Undervalued Based On Future Cash Flow

Fortive has delivered a 9.9% gain over the past year, even as shorter term moves have been softer, which puts a fresh spotlight on whether that share price lines up with the cash the business is expected to generate. With a Discounted Cash Flow (DCF) estimate available, the question for anyone looking at Fortive today is how closely the current market value tracks that cash flow driven view of intrinsic value.

• The 9.9% return over the past year means recent buyers are already in the green. The key issue now is whether future cash flows can justify paying around that level.
• Fortive’s portfolio of industrial and technology driven businesses can influence how smoothly earnings convert into cash, which matters for how much value the DCF model assigns to each share.
• If you'd rather focus on earnings, this one's for you. See why Fortive's 27.5x P/E tells a different valuation story.

The issue now is whether the cash flows implied by Fortive’s operations are strong and reliable enough to support where the stock is trading today.

If you want more ideas where the starting point is cash flow, consider using a focused screener of 31 high quality undervalued stocks.

Does Fortive Look Undervalued on Cash Flow?

The Discounted Cash Flow (DCF) model here looks at the cash Fortive is expected to generate for shareholders and discounts it back to today. On the latest twelve month view, the group produced Free Cash Flow of about $952.8 million, which is the starting point for the 2 Stage Free Cash Flow to Equity approach used. Analysts then project Free Cash Flow stepping up to just over $1.0b in the medium term and reaching an estimated $1.3b by 2030, before easing into slower, more mature growth.

Those projections, combined with the discount rate applied in the model, result in a total equity value that the DCF framework describes as meaningfully above the current share price of $54.81. For anyone considering Fortive today, the key point is that the cash flow based estimate indicates more value than the market is currently assigning, while the detailed number crunching sits behind the scenes. Find out what Fortive could be worth using our Discounted Cash Flow (DCF) estimate.

The Fortive Narrative: What Would Justify Today's Price?

Narratives on Fortive pick up where the DCF puzzle leaves off and outline which future paths for growth, margins and earnings would need to hold for the stock to be worth materially more or less than it is today on Simply Wall St's Community page. Each narrative links a fair value to a specific storyline about Fortive's potential catalysts and key risks, allowing you to track over time which version of events is actually unfolding.

One of the top community narratives on Fortive: 24% undervalued

"The rapid uptake of Fluke’s CertiFiber Max data center tool, where orders are reported to be far ahead of expectations and are pulling through additional Fluke offerings…"

Discover why this Narrative puts Fortive at 24% undervalued.

Fortive's valuation still leaves one uncomfortable gap

Before treating any cash flow model as the final word on Fortive, it helps to know that Simply Wall St's broader checks have already flagged areas of concern that deserve your attention next. Take a closer look at 1 warning sign before settling on a valuation.

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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