VLTO: Buyback And In-Situ Deal Will Shape Future EPS Compounding

Analysts have trimmed their Veralto price target to US$114 from US$123, citing an opportunistic US$750m buyback along with what they view as an expensive but strategically aligned US$422m In-Situ acquisition.

Analyst Commentary

Recent research commentary around Veralto focuses on the balance between capital returns to shareholders and the cost of new growth investments. The updated US$114 price target, reduced from US$123, reflects mixed views on how efficiently the company is deploying capital across buybacks and acquisitions.

Bullish Takeaways

Bullish analysts see the planned US$750m share buyback as a shareholder-friendly use of cash that can support per-share metrics if executed at attractive price levels.
The US$422m In-Situ purchase is viewed as aligned with Veralto’s core businesses, which supporters argue could reinforce the company’s long-term growth profile if integration goes smoothly.
Some bulls describe Veralto as a potential 10% compounder over time, which they see as consistent with a quality, recurring-revenue style business model.
Supportive views argue that combining a large buyback with portfolio expansion can help balance near-term capital return with longer-term growth, which they see as constructive for valuation over a multi-year horizon.

Bearish Takeaways

Bearish analysts highlight the lower price target as a signal that, even with the buyback, the risk–reward trade-off has become less attractive at current levels.
The US$422m In-Situ deal is flagged as expensive, with critics questioning whether the financial return on this acquisition will justify the outlay and support the previous valuation framework.
There is concern that paying up for M&A could limit flexibility for future investments or additional capital returns if the acquired business underperforms internal expectations.
Some cautious views suggest that execution risk around integrating In-Situ, combined with the new capital allocation mix, may cap upside until there is clearer evidence that the acquisition and buyback program are tracking in line with targets.

What's in the News

Veralto's board approved an 18% increase to its quarterly cash dividend, setting the payout at US$0.13 per share, payable on January 30, 2026 to shareholders of record on December 31, 2025 (Key Developments).
The company announced a share repurchase program that authorizes buybacks of up to US$750m of its shares, with no stated expiration date (Key Developments).
Veralto's board of directors authorized the buyback plan on November 25, 2025, providing the formal approval behind the announced repurchase program (Key Developments).

Valuation Changes

Fair Value Estimate trimmed slightly to US$114.0 from US$114.18, keeping the updated analyst target aligned with the model output.
Discount Rate adjusted marginally to 7.13% from 7.11%, reflecting a small change in the required return used in the valuation model.
Revenue Growth updated to 6.38% from 6.38%, with only a minimal tweak to forward revenue assumptions.
Net Profit Margin revised fractionally to 17.76% from 17.76%, implying a very small change in expected profitability.
Future P/E nudged slightly to 30.05x from 30.08x, indicating only a modest reset in the multiple applied to future earnings.

Growing global demand for water solutions and digital services is driving strong revenue growth, high margins, and increased business predictability.
Strategic M&A activity and expansion into emerging markets are broadening opportunities, enabling disciplined growth focused on technology-driven, high-margin businesses.
Weak performance in China, margin pressures from rising costs and integration, and reliance on mature markets may constrain Veralto's growth and profitability outlook.

Catalysts

About Veralto

Provides water analytics, water treatment, marking and coding, and packaging and color solutions worldwide.What are the underlying business or industry changes driving this perspective?

Robust and accelerating demand for water reuse, analytics, and treatment solutions-driven by global water scarcity, rising regulatory pressure, and sustainability goals-is translating into strong volume sales growth across both industrial and municipal customers, pointing to sustained revenue and margin expansion.
Increased adoption of digital workflow and connected software solutions (notably in PQI and Water Quality) is supporting high-margin, recurring revenue streams (now 61% of total sales), improving business predictability and supporting higher net margins and EPS growth.
Expansion and strong performance in emerging and high-growth markets (notably Latin America and India) combined with recent investments and M&A activity (Emerald Technology Water Fund, AQUAFIDES, TraceGains) are widening Veralto's addressable markets and accelerating top-line revenue growth.
Fast-growing verticals, such as data center water management, present structural, long-term penetration opportunities, underpinning future revenue growth and margin improvement as this segment scales.
Strong free cash flow generation and a conservative balance sheet position enable Veralto to pursue disciplined M&A focused on technology-driven, high-margin water quality and product identification businesses, driving future accretive EPS growth through operational synergies.

Veralto Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Veralto's revenue will grow by 6.0% annually over the next 3 years.
Analysts assume that profit margins will increase from 16.7% today to 17.7% in 3 years time.
Analysts expect earnings to reach $1.1 billion (and earnings per share of $4.46) by about September 2028, up from $893.0 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 31.3x on those 2028 earnings, up from 29.2x today. This future PE is greater than the current PE for the US Commercial Services industry at 25.7x.
Analysts expect the number of shares outstanding to grow by 0.34% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.02%, as per the Simply Wall St company report.

Veralto Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent weakness in China's Water Quality segment, which is described as "bouncing along the bottom" with no recovery expected in the near-term, indicates a company trend of underperformance in a major global market; this limits Veralto's international revenue growth potential relative to peers with stronger emerging market exposure.
PQI segment margins were flat year-over-year despite revenue growth, mostly due to integration costs from acquisitions (like TraceGains), tariff-related supply chain moves, and duplicated costs from manufacturing shifts, raising concerns that recurring investments and trade policy changes may continue to compress segment margins and slow overall earnings growth.
Secular pressures from rising raw material, labor, and energy costs due to inflation are evident in the explicit mention of cost headwinds and reliance on timely price increases; delays or inability to fully pass on these costs to customers could erode operating profit margins and impact future earnings.
High reliance on mature markets-core sales growth was led by North America and Western Europe, with China remaining weak and only selective strength in high growth markets like Latin America and India-may constrain Veralto's ability to sustain above-peer top-line revenue growth over the long term as those mature markets saturate.
TraceGains and software-driven growth initiatives require ongoing significant R&D and sales investment, and although these are expected to deliver high margins in the future, continued increased spending without rapid scaling could pressure short
to medium-term net margins and lengthen the payback period on these investments.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $115.588 for Veralto based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $130.0, and the most bearish reporting a price target of just $97.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.4 billion, earnings will come to $1.1 billion, and it would be trading on a PE ratio of 31.3x, assuming you use a discount rate of 7.0%.
Given the current share price of $105.03, the analyst price target of $115.59 is 9.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Water Reuse And Digital Workflows Will Shape Future Market Opportunities