Over the past six months, Vontier’s stock price fell to $36.21. Shareholders have lost 15.3% of their capital, which is disappointing considering the S&P 500 has climbed by 2.3%. This might have investors contemplating their next move.
Is there a buying opportunity in Vontier, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Vontier Will Underperform?
Even though the stock has become cheaper, we're cautious about Vontier. Here are three reasons there are better opportunities than VNT and a stock we'd rather own.
1. Slow Organic Growth Suggests Waning Demand In Core Business
In addition to reported revenue, organic revenue is a useful data point for analyzing Internet of Things companies. This metric gives visibility into Vontier’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Vontier’s organic revenue averaged 2.9% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Vontier’s revenue to rise by 1.6%. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below average for the sector.
3. EPS Growth Has Stalled
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Vontier’s flat EPS over the last five years was below its 2.6% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
We see the value of companies helping their customers, but in the case of Vontier, we’re out. After the recent drawdown, the stock trades at 10.9× forward P/E (or $36.21 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are superior stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.
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