Fortive CorporationFTVNYSE

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $77.59 per share(market-calibrated)

+33.7%

Upside to Fair Value

Current

$58.03

Pure Model

$78.85

Fair Value

$77.59

Bull Case

$94.43

Bear Case

$64.56

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

2.87%

Calibrated Growth

3.53%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $78.85.

What's Driving This Ratingfor FTV

✓

CapEx already efficient

CapEx at 1.86% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 16.98% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $1.4B (22.37% margin).

→

Moderate revenue growth

Analyst consensus projects -16.13% revenue growth, fading to 3.75% by Year 10. Revenue reaches $6.0B (vs $5.1B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $66.87/share (23.0x terminal FCF) while exit multiple gives $90.83/share (33.6x terminal FCF). The 28x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.75% growth is more conservative. The base case averages both methods.

✓

Model and market roughly agree

Market-implied terminal growth of 2.87% is close to the model's 3.75% (only 88bps apart). The DCF assumptions are well-aligned with how the market is pricing this stock.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 83.21% indicates efficient cash generation. FCF reaches $1.6B by Year 10 (26.06% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.03

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)9.15%

Cost of Debt

Pre-tax Cost of Debt3.73%

Tax Rate14.95%

After-tax Cost of Debt3.17%

Equity Weight (E/V)85.13%

Debt Weight (D/V)14.87%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (85.13% × 9.15%) + (14.87% × 3.17%)

= 8.26%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$4.3B	$4.7B	$5.0B	$5.4B	$6.0B
EBIT	$733M	$796M	$850M	$1.1B	$1.4B
Tax	$110M	$119M	$127M	$160M	$202M
NOPAT	$623M	$677M	$723M	$913M	$1.1B
+ Depreciation	$386M	$419M	$447M	$483M	$540M
- Capex	$80M	$87M	$93M	$101M	$113M
- Δ NWC	-$11M	$3M	$3M	$3M	$3M
Free Cash Flow	$940M	$1.0B	$1.1B	$1.3B	$1.6B
Discount Factor	0.924	0.788	0.672	0.574	0.452
Present Value	$868M	$792M	$722M	$742M	$712M

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.6B

Terminal Growth Rate3.75%

WACC8.26%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$36.2B

PV of Terminal Value$16.4B

Exit Multiple Method

Year 10 EBITDA$1.9B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$53.0B

PV of Terminal Value$24.0B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$7.6B

PV of Terminal Value$16.4B

Enterprise Value$24.0B

(-) Net Debt$2.8B

Equity Value$21.2B

Shares Outstanding316M

Price per Share$66.87

Exit Multiple Method

PV of Projected FCFs$7.6B

PV of Terminal Value$24.0B

Enterprise Value$31.6B

(-) Net Debt$2.8B

Equity Value$28.7B

Shares Outstanding316M

Price per Share$90.83

Pure Model Fair Value

$78.85

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
6.26%	$102.97	$109.79	$119.32	$133.59	$128.39
7.26%	$86.01	$89.67	$94.37	$100.63	$109.39
8.26%	$73.95	$76.15	$78.85	$82.22	$86.54
9.26%	$64.70	$66.13	$67.82	$69.85	$72.33
10.26%	$57.24	$58.22	$59.36	$60.68	$62.23

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$64.56

11.2% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: 1.29

Base Case

$78.85

35.9% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: 1.03

Bull Case

$94.43

62.7% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.88

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-16.13%

Year 3 Revenue Growth4.55%

Year 5 Revenue Growth3.99%

Year 7 Revenue Growth3.89%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin16.98%

Terminal EBIT Margin25.00%

Tax Rate14.95%

Historical Capex / Rev1.86%

NWC / Revenue1.35%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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