Watts Water Technologies, Inc. (NYSE:WTS), might not be a large cap stock, but it saw a significant share price rise of 32% in the past couple of months on the NYSE. The company's trading levels have reached its high for the past year, following the recent bounce in the share price. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today we will analyse the most recent data on Watts Water Technologies’s outlook and valuation to see if the opportunity still exists.
What's The Opportunity In Watts Water Technologies?
The stock seems fairly valued at the moment according to our valuation model. It’s trading around 7.3% below our intrinsic value, which means if you buy Watts Water Technologies today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $255.99, then there’s not much of an upside to gain from mispricing. So, is there another chance to buy low in the future? Given that Watts Water Technologies’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
Check out our latest analysis for Watts Water Technologies
What does the future of Watts Water Technologies look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 25% over the next couple of years, the future seems bright for Watts Water Technologies. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? WTS’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on WTS, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Watts Water Technologies, you'd also look into what risks it is currently facing. For example - Watts Water Technologies has 1 warning sign we think you should be aware of.
If you are no longer interested in Watts Water Technologies, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.