Vertiv VRT shares are currently overvalued, as suggested by its Value Score of D.

In terms of the 12-month price/book ratio, VRT is trading at 24.22, higher than its median of 22.83 and the Zacks Computer and Technology sector’s 10.6.

Price/Book Ratio (TTM)

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In the trailing 12 months, VRT shares have skyrocketed 77.9%, outperforming the broader sector’s appreciation of 25.1% and the Zacks Computers – IT Services industry’s return of 8.6%.

One Year Performance

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At such a high valuation, the question that arises is whether the VRT stock is a worthy investment. Let us dig deeper to find out.

VRT Benefits From an Expanding Portfolio

VRT’s extensive product portfolio that spans thermal systems, liquid cooling, UPS, switchgear, busbar and modular solutions is aiding its prospects.

The Vertiv PowerUPS 9000 is a cutting-edge solution tailored for high-performance IT applications that has expanded VRT’s data center power solutions portfolio. Available in UL and CE models ranging from 250 to 1250kW, the compact UPS system offers up to 97.5% efficiency in the double-conversion mode.

VRT has expanded its liquid cooling product line with its latest Vertiv CoolChip coolant distribution unit (CDU) systems. These systems allow data centers and colocation providers to manage multiple high-density racks with just one CDU. This helps meet the growing demand for AI technology by making it easier for data centers to use liquid cooling for high-performance computing alongside traditional air-cooled racks.

Vertiv is proactive in acquisitions, most recently acquiring centrifugal chiller technologies from BiXin Energy Technology (Suzhou) Co. Ltd., a Chinese company specializing in chillers, heat pumps and air-handling units. This move has expanded VRT’s chiller portfolio, enhancing its solutions for high-performance computing and AI globally.

A Rich Partner Network Bodes Well for Vertiv

VRT has a growing network of rich partnerships with companies, such as Ballard Power Systems BLDP, Compass Datacenters, NVIDIA NVDA, Intel INTC and ZincFive.

Its collaboration with NVIDIA involves co-developing power and cooling reference designs for the NVIDIA GB200 NVL72 platform, addressing the unique challenges of AI-driven workloads. NVIDIA leverages VRT’s expertise in liquid and air cooling to enable seamless integration and scalability.

VRT and Compass Datacenters have collaborated to create an innovative cooling solution that flexes between air cooling and liquid cooling for AI and high-density computing. Set to be deployed in early 2025, the technology is part of a multi-year, multi-billion-dollar partnership to support evolving data center needs.

Vertiv’s Positive 2025 Outlook

For 2025, VRT expects its data center segment to accelerate globally, supported by the continued strong AI-driven demand. Based on backlog and visibility into a strong pipeline, it expects 2025 organic sales growth to accelerate from 14% in 2024.

VRT expects its operating margins to expand, driven by operating leverage, productivity and commercial execution. It also expects strong free cash flow generation in the year, while reinvesting in research and development, go-to-market initiatives and additional capacity to support robust customer demand.

VRT’s 2025 Earnings & Revenue Estimates Indicate YoY Growth

The Zacks Consensus Estimate for VRT’s 2025 earnings is currently pegged at $3.58 per share, unchanged over the past 60 days, indicating year-over-year growth of 32.67%.

The consensus mark for VRT’s 2025 revenues is pegged at $9.20 billion, indicating year-over-year growth of 16.62%.

VRT beat the Zacks Consensus Estimate in each of the trailing four quarters, the average earnings surprise being 10.13%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Intense Competition & Inflation Pose Headwinds For VRT

Although VRT is experiencing rapid growth in the data center market, it is also facing fierce competition in the sector.

Established players like Schneider Electric and Legrand SA are fighting for market share by introducing innovative products, such as energy-efficient distribution solutions, UPS solutions, power and cooling systems, racks and cabling.

Persistent inflation is driving up VRT’s operating and logistical costs, directly affecting profitability. This makes it challenging for VRT to maintain competitive pricing and healthy margins. However, VRT anticipates that supply chain dynamics will remain stable in 2025, with commodity price volatility expected to be manageable.

What Should Investors Do With VRT Stock?

VRT is benefiting from its strategic partnerships, innovative solutions and a strong market presence.

However, an intensely competitive market landscape and inflationary challenges pose headwinds. Given the company’s modest growth prospects, we believe that its valuation is significantly stretched, making the stock a risky bet for investors.

VRT currently has a Zacks Rank #3 (Hold), suggesting that it may be wise for investors to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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