Waters Corp (WAT, Financial) has seen a daily gain of 5.26% and a 3-month gain of 2.83%, reflecting a positive trend in the stock market. With an impressive Earnings Per Share (EPS) of 11.01, investors are keen to understand if the stock is currently valued fairly. The central question we aim to answer is whether Waters (WAT) is modestly undervalued, and our valuation analysis seeks to provide clarity on this matter. We invite you to delve into the following analysis to uncover the intrinsic value of Waters (WAT).
Company Introduction
Waters Corp (WAT, Financial) specializes in providing cutting-edge analytical instruments such as liquid chromatography, mass spectrometry, and thermal analysis tools. These instruments are critical in examining molecular structures and physical properties, aiding clients across pharmaceutical, industrial, and academic sectors in improving health and well-being. With a stock price of $274.65 and a GF Value of $355.06, a preliminary comparison suggests that Waters might be trading below its fair value. This sets the stage for a deeper valuation analysis.
Summarize GF Value
The GF Value is a unique metric that represents the intrinsic value of a stock, incorporating historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line provides a benchmark for the stock's ideal fair value. If a stock trades significantly above this line, it may be overvalued with potentially poor future returns. Conversely, trading below the line could indicate undervaluation and the possibility of higher future returns.
At its current price, Waters (WAT, Financial) has a market cap of $16.20 billion, and our analysis suggests that the stock is modestly undervalued. This implies that the long-term return of Waters' stock could surpass its business growth, presenting an attractive opportunity for investors.
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Financial Strength
Investing in companies with robust financial strength is crucial to minimize the risk of capital loss. A good starting point to assess financial health is examining the cash-to-debt ratio and interest coverage. Waters' cash-to-debt ratio stands at 0.13, which is lower than the majority of its peers in the Medical Diagnostics & Research industry. Despite this, the overall financial strength of Waters is deemed fair with a score of 5 out of 10.
Profitability and Growth
Consistent profitability is a key indicator of a company's investment potential. Waters has maintained profitability over the past decade, with a remarkable operating margin of 28.03%, placing it ahead of 94.3% of its industry peers. The company's profitability score is a strong 10 out of 10.
In terms of growth, Waters' 3-year average annual revenue growth is 11.7%, which is competitive within its industry. The 3-year average EBITDA growth rate of 11.4% further substantiates the company's growth potential.
ROIC vs. WACC
Comparing Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) provides insight into a company's profitability relative to its capital costs. Waters' ROIC of 22.87 is significantly higher than its WACC of 9.53, indicating that the company is effectively creating shareholder value.
Conclusion
In conclusion, Waters Corp (WAT, Financial) appears to be modestly undervalued based on our analysis. The company exhibits solid financial health and robust profitability, with growth rates that are commendable within its industry. For a more detailed exploration of Waters' financials, investors can review the 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
