- If you are wondering whether Waters at around US$289.16 is starting to look interesting on valuation, this breakdown will help you put the current share price in context.
- The stock has seen a 3.3% decline over the last 7 days and is down 9.5% over 30 days, with year to date returns of a 24.3% decline and a 20.2% decline over the past year, adding to the sense that expectations and perceived risk have shifted.
- Recent commentary around Waters has focused on its position within the Life Sciences tools space and how investors are reassessing companies with similar profiles. This backdrop provides useful context when thinking about whether the recent 6.6% three year return and 1.6% five year return justify the current price.
- On Simply Wall St's 6 point valuation checklist, Waters currently scores 3 out of 6. The sections that follow will compare different valuation methods to show what that means in practice, before finishing with a way to understand value that goes beyond the usual ratios.
Find out why Waters's -20.2% return over the last year is lagging behind its peers.
Approach 1: Waters Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow model estimates what a company could be worth by projecting its future cash flows and discounting them back to today, so you can compare that value with the current share price.
For Waters, the 2 Stage Free Cash Flow to Equity model starts with last twelve months Free Cash Flow of about $507.6m and then uses analyst estimates for the next few years. Beyond that, Simply Wall St extrapolates cash flows, with projections in the ten year view ranging from about $755.7m in 2026 to around $2.7b in 2035, all stated in $.
When these projected cash flows are discounted back to today, the model arrives at an estimated intrinsic value of about $430.10 per share, compared with the current price of around $289.16. That implies the shares trade at roughly a 32.8% discount to this DCF estimate. This indicates a margin between the current price and the modelled cash flow value.
Result: UNDERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Waters is undervalued by 32.8%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.
Approach 2: Waters Price vs Earnings
For profitable companies, the P/E ratio is a straightforward way to see how much you are paying for each dollar of earnings. This can make it a useful cross check against cash flow based estimates. What counts as a reasonable P/E usually reflects how the market views a company’s growth prospects and risks. Higher expected growth or lower perceived risk often supports a higher multiple, and the opposite can also be true.
Waters currently trades on a P/E of about 44.1x, compared with the Life Sciences industry average of roughly 30.4x and a peer average of around 27.1x. Simply Wall St’s proprietary “Fair Ratio” for Waters is 26.3x. This Fair Ratio is designed to capture what a more tailored P/E might look like after considering factors such as the company’s earnings growth profile, profit margins, industry, market cap and specific risks.
Because it adjusts for these company specific drivers, the Fair Ratio can be more informative than a simple comparison with peers or the broad industry. Setting the current P/E of 44.1x against the Fair Ratio of 26.3x suggests the shares trade at a richer level than that tailored benchmark.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Waters Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives bring that to life by letting you pair your story about Waters with concrete numbers like your own fair value, revenue, earnings and margin assumptions, then link that story to a forecast and finally to a fair value that you can compare with today’s price on Simply Wall St’s Community page.
Each Narrative sits alongside others on the platform. You can see, for example, one investor building a Waters view around a Fair Value close to US$480.00 and another closer to US$330.00. Both sets of assumptions update as new company news, earnings guidance or analyst targets arrive. This can help you judge whether the current price or future moves in the share price line up with the story you find most reasonable for your own decision making.
Do you think there's more to the story for Waters? Head over to our Community to see what others are saying!
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.
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