With Underwhelming Growth And Expensive M&A, Fortive's Compounder Credentials Are In Question

It took a little longer than I expected, but at least some of the derating process that I'd expected for the industrial sector is taking place and it's been unpleasant so far, with many higher-multiple industrials down 10% or more since the start of the year, including "compounder" stocks like Danaher (DHR), IDEX (IEX), and Rockwell (ROK) (Ametek (AME) and Roper (ROP) are in this group too, but have declined less than 10% since the start of the year).

Fortive (NYSE:FTV) is included in that group, with a roughly 20% year-to-date decline and a similar move since my last update on the stock. I wasn't that fond of the shares then due in large part to valuation, but now there seems to be more grumbling about the multiples that Fortive is paying and whether shareholders are getting good value for that money.

I do share many of these concerns, though I think Fortive is also building a less-cyclical "all-weather" company that can generate some pretty solid free cash flow over the long term. While not my favorite company in terms of drivers or business strategy, and the valuation argument is not at all straightforward, I do think the share price is getting more interesting.

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With Underwhelming Growth And Expensive M&A, Fortive's Compounder Credentials Are In Question