$39.29
$93.08
bear $39.29
base $73.48
bull $93.08
margin of safety $45.00
market price* $101.04
Veralto sells water-quality and product-quality equipment plus the consumables and services that go with it. It was spun out of Danaher in late September 2023. Water Quality includes Hach water-testing instruments and reagents, Trojan ultraviolet disinfection, and water-treatment chemicals. Product Quality & Innovation includes Videojet and Linx marking and coding equipment (inks, cartridges, service) and Esko packaging workflow software. Sales were $5.5 billion in 2025, about 48% North America, 23% Western Europe and 27% high-growth markets. Recurring revenue (consumables, services, spare parts and leases) was close to 60% of sales in 2023, and the consumables are typically critical to running the customer's equipment. That installed base is the main thing we can point to that keeps producing cash. How we measured earnings: we started from operating cash flow and removed the net swing in working capital, stock-based compensation ($74 million in 2025) and maintenance capital spending (about $60 million; capital spending runs around 1% of sales and only a sliver of it is growth-related). Because the business only became a stand-alone borrower in September 2023, we then added back cash interest ($137 million in 2024, $138 million in 2025) so that the business is valued first and its lenders are subtracted afterwards. Owner earnings per share were $3.63, $3.49, $3.50, $3.20 and $3.68 for 2021 to 2025; adding back interest gives a business cash flow per share of about $3.63, $3.49, $3.50, $3.75 and $4.23. Two things to note: 2025 operating cash flow includes a $110 million rise in accrued liabilities, which we stripped out as timing, and intangible amortization is small ($36 million in 2025, down from $62 million in 2021), so the fading of acquired intangibles is not a material issue. We anchored on the median of 2023 to 2025 (the period as a stand-alone company), which is $3.75 per share, rather than on 2025's $4.23. Owner-earnings-based cash flow rose about 13% in 2025, but part of that is recovery from a soft 2024; we assume 3.5% growth for year one of the base case, well below that, because we would not extend a single strong year. Base case, about $73 per share. Business cash flow grows 3.5% a year for five years and 2.5% a year for the next five, after which it holds flat with no further growth. Growth credited is limited to what the record supports: core sales grew 4.7% in Water Quality and 4.8% in Product Quality & Innovation in 2025, of which price contributed 1.5 and 2.6 points, and total revenue has grown about 4% a year since 2021 without a down year. We credit less than that and no margin expansion, no share gains and no acquisitions (the company has made only one, In-Situ, for $363 million in 2024, so there is no repeatable pace to extend). After year ten we keep the earnings flat because the consumables and service revenue on an installed base persists; we credit no growth beyond that. The business is worth about $79 per share; it owes about $6 per share; the difference is roughly $73. Bull case, about $93 per share. The business holds the 2025 level of $4.23 per share, which it has already reached, and keeps growing at 5% for five years and 3.5% for five more, in line with the 2025 core sales growth of about 4.8% and the operating margin of 25.4% (24.5% in 2024) continuing. It then holds flat. Business worth about $99 per share, debt about $6, difference about $93. Bear case, about $39 per share. Business cash flow stays at the lowest level of the past five years, $3.49 per share, with no growth for ten years, on the view that pricing contributions (1.5 to 2.6 points of sales growth in 2025) and the 27% exposure to high-growth markets (where China core sales fell in Water Quality) stop helping. After year ten, only the recurring consumables and service base, roughly 60% of sales, is assumed to keep earning, so earnings fall to about $2.10 per share and stay there. Business worth about $45 per share, debt about $6, difference about $39. Debt: at the latest quarter (April 3, 2026) Veralto owed $2,662 million in fixed-rate senior notes: $700 million at 5.50% due September 2026, $700 million at 5.35% due September 2028, EUR 500 million at 4.15% due September 2031 and $700 million at 5.45% due September 2033. Cash was $1,431 million; we treated $250 million as needed to run the business, leaving net debt of about $1,481 million, or about $5.94 per share on 249 million shares. The average coupon (about 5.2%) is close to the 6% we use, so we made no cost-of-debt adjustment. The September 2026 maturity is small relative to cash on hand and annual business cash flow of roughly $1 billion, so refinancing is not a stretch in any of the cases; in each case business cash flow covers interest of about $138 million many times over. What would make this wrong: a sustained decline in the industrial and consumer-goods customers who purchase Videojet and Linx equipment and consumables, loss of pricing power (price was a large part of 2025 growth), heavier tariff or China exposure than assumed, or municipal water spending falling. Operating cash flow before 2024 came from a parent-funded carve-out, so pre-2024 figures are stand-alone estimates as presented in the filings, and per-share figures for 2021 and 2022 use the pro-forma share count reported at the time of separation. The margin-of-safety price is about $45 per share, a price a little above the bear case and about 39% below the base case, reflecting a stable, largely recurring-revenue business with a modest debt load.