Veralto Corp (NYSE: VLTO)

Sector: Industrials Industry: Pollution & Treatment Controls CIK: 0001967680
Market Cap 22.76 Bn
P/B 9.89
P/E 26.05
P/S 4.31
ROIC (Qtr) 18.28
Div Yield % 0.57
Rev 1y % (Qtr) 6.85
Total Debt (Qtr) 2.67 Bn
Debt/Equity (Qtr) 0.94
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About

Investment thesis

Bull case

  • Healthy cash reserves of 1.77B provide 2.54x coverage of short-term debt 700M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 1.05B provides exceptional 10.11x coverage of interest expenses 104M, showing strong debt service capability.
  • Operating cash flow of 1.05B provides strong 14.20x coverage of stock compensation 74M, indicating sustainable incentive practices.
  • Robust free cash flow of 986M exceeds capital expenditure of 65M by 15.17x, indicating strong organic growth funding capability.
  • Robust tangible asset base of 4.08B provides 3.52x coverage of working capital 1.16B, indicating strong operational backing.

Bear case

  • Operating cash flow of 1.05B barely covers its investment activities of (457M), with a coverage ratio of -2.30, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 1.05B provides thin coverage of dividend payments of (104M) with a -10.11 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Investment activities of (457M) provide weak support for R&D spending of 267M, which is -1.71x, suggesting potentially insufficient investment in innovation relative to other capital deployment.
  • Cash reserves of 1.77B provide limited coverage of acquisition spending of (363M), which is -4.89x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 875M relative to inventory of 340M (2.57 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.

Peer comparison

Companies in the Pollution & Treatment Controls
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 VLTO Veralto Corp 22.76 Bn 26.05 4.31 2.67 Bn
2 ZWS Zurn Elkay Water Solutions Corp 8.65 Bn 43.69 5.10 0.54 Bn
3 FSS Federal Signal Corp /De/ 7.21 Bn 168.93 10.04 0.24 Bn
4 CECO Ceco Environmental Corp 2.77 Bn 53.33 3.85 0.24 Bn
5 PCT PureCycle Technologies, Inc. 1.46 Bn -6.40 258.45 0.43 Bn
6 ERII Energy Recovery, Inc. 0.91 Bn 46.74 6.75 0.00 Bn
7 ADUR Aduro Clean Technologies Inc. 0.33 Bn -23.93 1,516.99 0.00 Bn
8 ARQ Arq, Inc. 0.13 Bn -34.10 1.13 0.03 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.27 3.33
EV to Cash from Ops. EV/CFO 26.46 -65.71
EV to Debt EV to Debt 9.08 136.79
EV to EBIT EV/EBIT 19.61 3.75
EV to EBITDA EV/EBITDA 18.48 8.77
EV to Free Cash Flow [EV/FCF] EV/FCF 28.21 2.21
EV to Market Cap EV to Market Cap 1.07 1.03
EV to Revenue EV/Rev 4.60 89.55
Price to Book Value [P/B] P/B 9.89 6.68
Price to Earnings [P/E] P/E 26.05 15.25
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 8.78 1.12
Dividend Payout Ratio % Div Payout % (Qtr) 9.00 3.26
Dividend per Basic Share Div per Share (Qtr) 0.33 0.07
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 8.32 2.56
Interest Coverage Int. cover (Qtr) 12.15 -107.95
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -18.18 -82.15
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 40.09 79.04
Dividend Growth (1y) % Div 1y % (Qtr) -8.33 1.42
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 11.90 -265.30
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 6.40 -75.61
EBIT Growth (1y) % EBIT 1y % (Qtr) 7.39 -272.40
EBT Growth (1y) % EBT 1y % (Qtr) 8.72 -325.95
EPS Growth (1y) % EPS 1y % (Qtr) 12.20 2,177.75
FCF Growth (1y) % FCF 1y % (Qtr) 23.56 -76.02
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 7.28 7.23
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.73 0.42
Cash Payout Ratio Cash Payout (Qtr) 0.09 0.02
Cash Ratio Cash Ratio (Qtr) 0.87 2.16
Current Ratio Curr Ratio (Qtr) 1.57 3.56
Debt to Equity Ratio Debt/Equity (Qtr) 0.94 0.60
Interest Cover Ratio Int Coverage (Qtr) 12.15 -107.95
Times Interest Earned Times Interest Earned (Qtr) 12.15 -107.95
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 24.60 -775.28
EBIT Margin % EBIT Margin % (Qtr) 23.18 -2,721.83
EBT Margin % EBT Margin % (Qtr) 21.28 -2,762.77
Gross Margin % Gross Margin % (Qtr) 60.00 -44.42
Net Profit Margin % Net Margin % (Qtr) 16.70 -2,763.74