Fortive has been treading water for the past six months, recording a small loss of 1.9% while holding steady at $74.30.

Is there a buying opportunity in Fortive, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free .

We're cautious about Fortive. Here are three reasons why we avoid 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

In addition to reported revenue, organic revenue is a useful data point for analyzing Professional Tools and Equipment companies. 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 3.1% 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. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Fortive’s revenue to rise by 1.2%, a slight deceleration versus its 3.4% annualized growth for the past two years. This projection doesn't excite us and suggests its products and services will face some demand challenges.

3. 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 1.4% compounded annual growth rate over the last five years, lower than its 6.4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Fortive isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 18.1× forward price-to-earnings (or $74.30 per share). This multiple tells us a lot of good news is priced in - we think there are better investment opportunities out there. We’d recommend looking at a top digital advertising platform riding the creator economy .

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