Veralto trades at $107.37 and has moved in lockstep with the market. Its shares have returned 7.6% over the last six months while the S&P 500 has gained 8.8%.
Is now the time to buy Veralto, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Veralto Will Underperform?
We're sitting this one out for now. Here are three reasons why VLTO doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last four years, Veralto grew its sales at a sluggish 4% compounded annual growth rate. This was below our standard for the industrials sector.
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 Veralto’s revenue to rise by 5.6%, close to its 4% annualized growth for the past four years. This projection is underwhelming and implies its newer products and services will not accelerate its top-line performance yet.
3. EPS Growth Has Stalled
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Veralto’s flat EPS over the last four years was below its 4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Veralto falls short of our quality standards. That said, the stock currently trades at 27.9× forward P/E (or $107.37 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. Let us point you toward an all-weather company that owns household favorite Taco Bell.
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