Since July 2024, Fortive has been in a holding pattern, floating around $76.09. This is close to the S&P 500’s 4.2% gain during that period.
Is now the time to buy Fortive, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
We don't have much confidence in Fortive. Here are three reasons why you should be careful with FTV and a stock we'd rather own.
Why Is Fortive Not Exciting?
Taking its name from the Latin root of "strong", Fortive (NYSE:FTV) manufactures products and develops industrial software for numerous industries.
1. Slow Organic Growth Suggests Waning Demand In Core Business
Investors interested in Professional Tools and Equipment companies should track organic revenue in addition to reported revenue. This metric gives visibility into Fortive’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Fortive’s organic revenue averaged 4.6% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Fortive’s EPS grew at a weak 1.5% compounded annual growth rate over the last five years, lower than its 4.1% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. Previous Growth Initiatives Haven’t Paid Off Yet
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Fortive historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.5%, somewhat low compared to the best industrials companies that consistently pump out 20%+.
Final Judgment
Fortive isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 18.5× forward price-to-earnings (or $76.09 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d recommend looking at The Trade Desk, the nucleus of digital advertising.
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