Waters Corp (WAT, Financial) recently showcased a daily gain of 3.9%, complementing a three-month growth rate of 4.2%. With an Earnings Per Share (EPS) at 10.19, investors are keen to determine if the stock is fairly valued. This analysis delves into Waters Corp's valuation, providing insights that will guide potential investors and current shareholders alike.
Company Overview
Waters Corp operates in the scientific instrumentation sector, specializing in liquid chromatography, mass spectrometry, and thermal analysis tools. These instruments are crucial for analyzing molecular structures and physical properties, aiding sectors from biopharmaceuticals to academic research. In 2023, Waters generated 57% of its sales from biopharmaceutical clients, 31% from industrial markets, and 12% from academic and government institutions. Currently, with a stock price of $336.42 and a market cap of $20 billion, the GF Value estimates the fair value at $337.8, suggesting that Waters is fairly valued.
Understanding GF Value
The GF Value is a proprietary measure reflecting the true value of a stock, calculated through historical trading multiples, a GuruFocus adjustment factor based on past returns and growth, and future business performance estimates. For Waters, the GF Value suggests the stock is trading close to its fair intrinsic value. This equilibrium indicates that long-term returns should closely mirror the company's business growth rate.
Financial Strength and Stability
Investing in companies with robust financial health reduces the risk of capital loss. Waters's current cash-to-debt ratio stands at 0.17, a figure lower than 85.34% of peers in the Medical Diagnostics & Research industry. This metric, along with a fair financial strength rating of 6 out of 10 from GuruFocus, suggests a need for cautious evaluation of the company's debt levels.
Profitability and Growth Prospects
Waters has consistently demonstrated profitability, with impressive margins that surpass 94.64% of its industry counterparts. The company's strategic position in the growing biopharmaceuticals sector, complemented by a 3-year average revenue growth rate better than 59.41% of its peers, positions it well for sustained growth. Additionally, the company's Return on Invested Capital (ROIC) of 18.52 significantly outstrips its Weighted Average Cost of Capital (WACC) at 11, indicating efficient value creation.
Conclusion
Waters (WAT, Financial) appears to be fairly valued at its current price, reflecting its strong financial condition and solid profitability. With a competitive edge in a growth-oriented industry, Waters presents a potentially stable investment. For a deeper understanding of its financial health and operational success, potential investors should review Waters's 30-Year Financials.
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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.
