Tuesday, UBS resumed coverage on shares of Vontier Corporation (NYSE:VNT), a company specializing in software and hardware solutions for the Mobility Ecosystem, with a Buy rating and a price target of $47.00. Currently trading at $38.89 with a market capitalization of $5.8 billion, Vontier has demonstrated strong momentum with a 12.86% year-to-date return.
According to InvestingPro data, the company maintains a GOOD financial health score, suggesting solid fundamentals. The firm highlighted the improved market conditions anticipated for 2025, which are expected to lead to upward revisions in consensus estimates and enhanced investor sentiment, potentially resulting in a valuation multiple re-rating.
Vontier, serving convenience stores, gas stations, car washes, fleet managers, and auto repair shops, is seen to benefit from a lower inflation and interest rate environment. This is particularly advantageous for its car wash and repair tools businesses, which have experienced sluggish growth since 2021.
Moreover, the sustainability of retail fueling venues is underlined by the continued presence of traditional automotive infrastructures and delays in electric vehicle platform rollouts, referred to as "Trump 2.0" in the context.
The analysis from UBS suggests that Vontier's DRB and Matco businesses are approaching a cyclical bottom. Given the company's current valuation, which is notably lower than its peers, the risk-reward ratio is skewed approximately 2.7:1 to the upside. This assessment aligns with InvestingPro data showing Vontier trading at an attractive P/E ratio of 14.86x and a favorable PEG ratio of 0.66, indicating potential undervaluation relative to growth prospects.
Subscribers to InvestingPro gain access to comprehensive valuation metrics and 6 additional ProTips for deeper analysis. This implies a more favorable outcome for investors with the potential for significant gains.
UBS forecasts a 5% compound annual growth rate (CAGR) in sales for Vontier from 2024 to 2026. This projection is more optimistic than the market's expectation, which prices in a sales growth of around 3%. With current annual revenue of $2.99 billion and a strong gross profit margin of 48.24%, Vontier shows promising fundamentals.
For detailed growth analysis and expert insights, investors can access the comprehensive Pro Research Report available on InvestingPro, covering this and 1,400+ other top US stocks. The firm's assessment indicates a positive outlook for Vontier, with the expectation that current concerns over the company's growth and its position in the electric vehicle transition will diminish over time.
In other recent news, Vontier reported a 3% increase in core sales in its third-quarter earnings, with total sales reaching $750 million. The environmental and fueling technology segments showed strong performance, contributing to significant growth in the Invenco product line. Despite some market challenges, executives expressed confidence in the ongoing strategic direction and innovation efforts.
The company also launched a $2 million EV charging solution and secured three large tenders in India worth approximately $70 million. Adjusted EPS was reported at $0.073, with a free cash flow of $109 million, indicating a 98% conversion rate. The company anticipates full-year revenue of approximately $2.97 billion with an adjusted EPS around $2.90.
Vontier expects healthy demand across most markets for 2025 and is optimistic about growth and margin expansion. The company also anticipates operating leverage to be in the low 30s, with expected margin expansion driven by improvements in core business pillars. These are all recent developments in the company's ongoing journey.
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