Fortive Corp (FTV) stock intrinsic value fair value estimate & owner earnings analysis

Fortive sells measurement instruments, software and services in two segments. Intelligent Operating Solutions (about $2.86 billion of 2025 sales, roughly 69% of the total) includes Fluke test tools, Industrial Scientific and gas detection products, and the ServiceChannel, Gordian, Accruent and Intelex facility, asset and safety software. Advanced Healthcare Solutions (about $1.30 billion) includes Advanced Sterilization Products, Censis, Fluke Biomedical, Landauer and Provation. In June 2025 Fortive spun off its Precision Technologies business as Ralliant. We value only the business that remains, using the restated figures for 2023 through 2025, because earlier years describe a different, larger company. What the business earns. We measure owner earnings as operating cash flow from continuing operations, less the cash effect of working-capital swings, less stock compensation (a real cost), less the part of capital spending needed just to stand still. On that basis owner earnings were about $690 million in 2023, $846 million in 2024 and $817 million in 2025, or $1.94, $2.40 and $2.44 per diluted share on the share counts of those years. The middle year is $817 million. We use that as the starting level, and divide it by roughly 313 million shares, the diluted count in Fortive's first quarter of 2026 after heavy buybacks, giving about $2.61 per share. Only three years exist on this basis, so the window is short. Owner earnings fell about 3% in 2025, largely because stock compensation rose from $90 million to $117 million, which the filing attributes primarily to incremental costs related to the separation. We did not add that back. Operating cash flow in the first quarter of 2026 was $235 million against $242 million a year earlier, so nothing there argues for a higher level. Amortization of acquired intangibles is large, about $368 million a year, and is a non-cash charge that we do not deduct, since it is a sunk acquisition cost. It does mean that acquired technology and customer relationships are a wasting asset: net intangibles fell from $2.53 billion to $2.19 billion in 2025. We therefore give no growth from acquisitions. Cash paid for acquisitions was only $96 million, $4 million and $26 million in 2023, 2024 and 2025. Growth credited comes only from pricing, which added 2.2% in 2025 and 2.9% in 2024, and which we credit at 2% a year after a flat first year. We left out volume gains, new products and margin expansion. Volume actually fell 0.6% in 2025, and core sales growth was 1.7% in 2025 and 4.3% in 2024. Because owner earnings fell about 3% in 2025, the base case assumes no growth in the first year rather than a rebound. Base case, about $37.70 per share: owner earnings of $2.61 per share, flat in the first year, then growing 2% a year through year 10, then held flat for a further 15 years and then assumed to end. The flat stretch rests on a product base that has grown sales in each of the last two years, spends about $259 million a year (6.2% of sales) on research and development, and has pricing power. Beyond 25 years we credit nothing, because we cannot point to evidence that far out. Bear case, about $16.20 per share: owner earnings stay at the weakest of the three years, $690 million or about $2.20 per share, with no growth, for ten years and then end. The named pressures are real. Volume fell in 2025 with weakness in professional instruments, and Europe declined modestly. The filing flags reduced U.S. government spending from the One Big Beautiful Bill Act and continuing tariff uncertainty. The company took an intangible impairment in 2023, and it carries about $3.2 billion of debt ($900 million due within a year) with $120.5 million of net interest expense in 2025. It also carries possible indemnity obligations to Ralliant and Vontier under the separation agreements. Bull case, about $50.80 per share: owner earnings return to the 2024 level of $846 million, about $2.70 per share, and grow 4% a year for ten years, close to the 2024 core growth of 4.3% built from 2.9% pricing and 1.4% volume. They are then held flat for 25 years before ending. We tested the pricing assumption against the record. All of the 2025 sales growth came from price, with volume down, which is why we credit price only and at a modest rate. We did not subtract the company's debt from value, because the interest it costs is already inside operating cash flow. The debt is instead reflected in the bear case. One limit we could not resolve from the filings: they do not give a continuing-operations record before 2023, so the track record of the current company rests on three years. The margin-of-safety price is about $22, set with a wide cushion against the bear case.