Is Fortive (FTV) Still Undervalued After Strong Q3 Earnings?

Fortive (NYSE: FTV) has long been a favorite of value investors, and its Q3 2025 results have reignited the debate: Is this diversified industrial conglomerate still trading at a discount to its intrinsic value? The answer lies in dissecting its robust fundamentals, valuation metrics, and the near-term headwinds that could temper its long-term growth trajectory.

Strong Fundamentals and Strategic Execution

Fortive's Q3 2025 performance was nothing short of impressive. The company reported revenue of $1.03 billion, a 2.3% year-over-year increase, with adjusted EBITDA of $309 million and a 30.1% margin-up 10.4% from the prior year according to Q3 results. Free cash flow for the quarter hit $266 million, with a trailing twelve-month total of $922 million according to Q3 results. These numbers underscore Fortive's operational discipline and its ability to convert revenue into cash.

The company's capital allocation strategy further bolsters its case. Fortive repurchased $1 billion in shares during Q3, reducing diluted shares by 6%. This aggressive buyback, combined with a $0.06 per share dividend declared in November, signals confidence in its cash flow generation and commitment to shareholder returns. CEO Olumide Soroye emphasized at the Baird 2025 Global Industrial Conference that Fortive's "Fortive Accelerated" strategy-focusing on organic growth, margin expansion, and disciplined M&A-is driving long-term value according to conference transcripts.

Valuation: Fair or Undervalued?

Fortive's valuation metrics suggest it is trading near fair value. As of November 2025, its P/E ratio stands at 19.1x according to Webull data, below the Machinery industry average of 24.8x according to Webull data. A discounted cash flow (DCF) analysis estimates its intrinsic value at $52.71 per share according to Webull analysis, while a narrative-driven valuation model suggests $56.13 according to Simply Wall St. At current prices, Fortive appears to be priced close to its DCF-derived fair value, with a slight undervaluation in the narrative-driven model.

The company's P/S ratio of 2.3x and P/EBIT ratio of 13.7x also look attractive relative to its peers. For context, the average P/S for industrial conglomerates is typically 3-4x, and P/EBIT ratios often range between 10-15x. Fortive's metrics suggest it is not overpaying for growth, especially given its consistent free cash flow generation and strong balance sheet.

Despite the positives, Fortive faces near-term challenges. Tariff-related costs have already eroded its adjusted gross margin by 60 basis points according to earnings call data, with CFO Mark Okerstrom noting a $0.01 per share headwind from direct tariffs according to earnings call data. While the company is mitigating these costs through pricing actions and supply chain adjustments, the impact could persist into 2026.

Soft demand in Western Europe is another concern. Fortive's Advanced Healthcare Solutions segment, which accounts for a significant portion of its revenue, is grappling with U.S. healthcare funding policy changes that have led to hospital capital expenditure deferrals according to earnings call data. This segment's performance could lag in the near term, dragging on overall growth.

Long-Term Growth: A Tailwind Worth Betting On

Fortive's long-term prospects remain compelling. The company is doubling down on high-growth sectors like data centers, EV infrastructure, and facilities management-markets poised for multi-year expansion according to conference transcripts. Its Fluke business, a leader in industrial tools and diagnostics, is also a key growth driver, with recurring revenue streams and strong brand loyalty.

Moreover, Fortive's guidance for 2025-raising adjusted EPS to $2.63–$2.67 from $2.50–$2.60 according to Q3 results-reflects confidence in its ability to navigate near-term headwinds. The company's focus on EBITDA margin expansion according to conference transcripts and its $20 million replenished share repurchase authorization according to press release further reinforce its commitment to shareholder value.

Conclusion: A Buy for the Patient Investor

Fortive's Q3 results reaffirm its status as a well-run industrial company with a strong balance sheet, disciplined capital allocation, and a clear long-term strategy. While near-term risks like tariffs and European demand softness could weigh on its stock, these challenges are manageable and do not overshadow its structural advantages.

For investors with a multi-year horizon, Fortive's valuation-trading near DCF fair value and with a narrative-driven undervaluation-presents an attractive entry point. The key is to monitor its ability to execute on margin expansion and navigate macroeconomic headwinds. If Fortive can maintain its operational momentum, it could deliver outsized returns as it capitalizes on the industrial renaissance in data centers, healthcare, and EV infrastructure.