11:57 AM EDT, 08/13/2024 (MT Newswires) -- Veralto ( VLTO ) is a "high quality compounder over time" with steady growth, profit margins and free cash flow, UBS Securities said Monday in a report initiating coverage of the company.

Veralto ( VLTO ) follows a "best-in-class" operating model and is expected to grow sales by 4% annually through 2026, driven by the water-treatment business and industry's focus on supply chain efficiency.

"The stock is already pricing in these favorable attributes," the report said. "Less margin

opportunity, lower exposure to water infrastructure and premium valuation versus select

peers keep us on the sidelines for now."

Merger deals will be crucial in driving the stock performance with "sound acquisitions" by management underpinning a high valuation, UBS said.

UBS has a neutral rating on the stock and a $118 price target.

Shares of Veralto ( VLTO ) rose 1% in recent trading Tuesday.

Price: 107.58, Change: +1.09, Percent Change: +1.02