Fortive Corporation (FTV)

Total return at 5 years: 0.0%/year = -0.5% appreciation + 0.5% dividend. The target price ($56) is ex-dividend; the $1 in dividends collected over 5 years are added separately.

The methods disagree: one places the value today above the price ($57) and the other below.

Today — expensive, no margin of safety: at $57 trades ~24.1% above its value discounted to today (~$46); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Preserva valor: the target price ($56) plus dividends yield just enough to preserve nominal capital, below the required 4% floor.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$29.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($57) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-1.0%/year) than we project (5.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$0.9 bn of owner earnings in year 5 (vs ~$1.3 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on EV/EBIT — suma de las partes por segmento. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 is the TTM re-based to 3 July 2026 (FY2025 + cumulative H1-2026 − cumulative H1-2025, from levels), after incorporating the earnings 8-K of 29-Jul-2026, whose quarter was not yet in XBRL at the time of extraction. Fortive is valued as a sum of the parts with two segments of different natures: Intelligent Operating Solutions (IOS, general industrial instrumentation and software, not FDA-regulated, the industrial archetype) and Advanced Healthcare Solutions (AHS, sterilization and medical devices regulated by FDA 510(k)/MDR, the medical technology archetype). Each segment is projected with its own growth and operating margin, and the consolidated exit multiple is the average weighted by each segment's terminal EBIT: IOS at 15× EV/EBIT (industrial band 12-18×) and AHS at 18× EV/EBIT (medical technology band 16-22×, applied on EBIT rather than P/E because the segment does not report net income of its own). The EBIT/OCF series does not use a net margin (netMargin): the flow is pre-interest (EV-level), consistent with debt (US$3,509 million at Jul-2026) and cash (US$0.39 billion) being included in the common block (cash start/debt), avoiding giving away the debt as happened in YUM/MKC/HSY. With no current revenue guidance (the July 2026 guidance covers only non-GAAP adjusted EPS); year 1 starts from the recent core growth trajectory (6.7% consolidated in Q2 2026, accelerating from lower levels in 2023-2024), not from a guidance anchor. Material buybacks (~11% of the share count over the last four quarters) modeled via sharesPath (not accumulateCash), with the pace decelerating going forward because the recent pace was funded partly with commercial paper, not solely with free cash flow — projecting the current pace without adjustment would be concatenated optimism. Total capex (US$0.114 billion TTM) is far below D&A (US$0.448 billion, dominated by non-economic amortization of acquisition intangibles): under Greenwald, at that level of capex practically all of it is maintenance and there is no material growth capex to separate.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $56 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $57, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $56 in 5 years plus $1 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $46. Against the current market price ($57), the margin of safety is -24.1% (trades above the maximum → a premium is paid) and the total return at that price would be 0.0% annually.

• Current GAAP multiple. The current GAAP EV/EBIT (27×) is well above the industrial archetype band (12-18x), largely due to intangible amortization.
• Margin of safety. No margin of safety: at this price capital is preserved, but it is not bought below its value.
• Sensitivity to the terminal multiple. The 5-year value depends heavily on whether the market keeps rewarding adjusted EPS over GAAP EBIT.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (143%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. TTM FCF of US$1,044 million with solid OCF conversion, though insufficient to cover the recent buyback pace.
• ROIC versus the 10% bar. Below the bar, depressed by accumulated goodwill from a history of acquisitions, not necessarily by poor operations.
• Reinvestment runway. Low maintenance capex (~2.6% of sales); growth relies more on complementary M&A than on intensive organic capex.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

AHS shows a structurally lower operating margin than IOS due to the heavier acquisition-related intangible amortization burden, with a slight recovery in the most recent TTM. The buyback pace accelerated markedly between FY2024 and the TTM (from ~US$0.89 billion to ~US$1.97 billion), consistent with the stated capital allocation priority toward buybacks after the Ralliant spin-off.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (03-jul-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Recent acceleration. Core growth accelerating to 6.7% in Q2 2026 from lower levels in 2023-2024.
• Segment mix. IOS grows faster (7.4% core) than AHS (5.3% core), which faces a healthcare policy headwind.
• Guidance. 2026 guidance only covers adjusted EPS (US$2.95-US$3.05), with no explicit revenue range.

• Recurrence and predictability. Maintenance, software, and consumables revenue (sterilization, calibration) generates a recurring base, though the filing does not break out the exact mix.
• Product differentiation. Niche brands with claimed leading positions (Fluke, ASP), though the 10-K acknowledges the aggregate competitive position cannot be precisely measured.
• Pricing power. Favorable price/mix (+2.2% in 2025) offset a volume decline (-0.6%), a sign of moderate pricing power.
• Behavior in recessions. The filing does not break out historical recession performance by segment.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• !Leverage (net debt / EBITDA)Net debt / EBITDA 2.5x
• !Interest coverage (EBIT / interest)6.4x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 143% of ROIC
• ✕Value creation (ROIC − 10% bar)-2pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.3x — no over-investment
• !Float / working capitalConsumes cash $0.1 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 2.7% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Long-term debt ~US$3,500 million versus cash ~US$0.4 billion; short-term debt funded a good part of the recent buyback.
• Liquidity. No current portion of long-term debt as of the close of July 2026; active access to commercial paper.
• Interest coverage. TTM EBIT (~US$787 million) comfortably covers TTM net interest expense (~US$123 million).

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Alignment. No controlling shareholder declared; ownership dominated by passive and active institutional managers.
• Capital allocation. Heavily prioritizes buybacks (~91% of capital deployed) over dividends and M&A, with part funded by short-term debt.
• Executive continuity. New CEO, CFO, and Chief People Officer in 2025-2026, concurrent with the Ralliant spin-off.

• Analyst coverage still light after completing its second spin-off in six years in 2025 (Vontier 2020, Ralliant 2025), with a short track record as the "new Fortive"
• Simultaneous transition of CEO, CFO, and Chief People Officer in 2025-2026, generating short-term execution uncertainty even though first-half results already show acceleration
• GAAP operating profit is depressed by roughly US$370 million a year of acquisition-related intangible amortization, a non-economic charge that penalizes the reported EV/EBIT multiple without necessarily reflecting lower cash generation

There is no compelling missing-buyer or motivated-seller discount source: the current price may also reasonably reflect the market valuing adjusted non-GAAP EPS over the disciplined GAAP EBIT of this method. No margin of safety: at this price capital is preserved, but it is not bought below its value.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -12%/year (-46% total): the margin of safety protects the downside. The bull (+8%/year, +47% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Executive transition. New CEO, CFO, and Chief People Officer in 2025-2026.
• Tariffs and trade. ~44% of sales outside the United States; uncertainty from the invalidation of IEEPA tariffs.
• FDA regulation. Advanced Healthcare Solutions depends on 510(k) clearances and MDR/UKCA compliance.
• Intangible impairment. Net goodwill and intangibles of ~US$9,500 million, sensitive to a change in business trend.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC 8% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 5% at a multiple/growth of 5.4 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 4% (EBIT/EV) + ROIC 8% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -1% vs our 5%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -12%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: switching costs, intangibles, efficient scale → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -1%, within what we project (5%) — the story squares with the numbers.