Trying to decide what to do with Waters stock? You’re not alone. Whether you’ve already got a stake or are looking for an open lane, recent moves in the share price have sparked plenty of conversation. After a lukewarm year so far, with the stock down 9.1% year to date, Waters just pulled off a strong 10.2% rally over the past month, following a more modest 1.1% gain last week. That kind of reversal always catches the eye, especially for a company that has managed to post an 18.6% return over three years and a 50.8% gain across five years.
It’s tempting to ask: is this a new wave of growth, a shift in how investors are weighing the risks, or just another stop along the familiar rollercoaster of biotech and lab technology stocks? While there haven’t been any particularly seismic market-wide developments recently that would single-handedly drive such a move, investor sentiment across similar sectors has improved, fueling renewed optimism in select names like Waters.
But the real question goes deeper than just price performance. Is Waters actually undervalued today, or is the current rally already pricing in future prospects? Out of six common valuation checks, the company comes up positive on just two, earning a valuation score of 2. That’s a start, but far from a slam dunk for bargain hunters.
Let’s dive into each of the traditional valuation approaches to see what’s driving that score, and then finish with a look at a more holistic way to judge whether Waters truly deserves your confidence for the long run.
Waters scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Discounted Cash Flow (DCF) model estimates a company’s worth by projecting its future cash flows and then discounting them back to their value today. This approach helps investors understand what Waters might really be worth, based on its ability to generate cash over the coming years.
Currently, Waters is generating free cash flow of $590.7 million. Analyst forecasts suggest that by 2028, this could reach $1.02 billion. Projections beyond five years are extrapolated from current trends. These forward-looking estimates are based on a 2 Stage Free Cash Flow to Equity model, which is a common approach for companies with mature but still growing operations.
Applying this DCF model, the estimated intrinsic value for Waters comes out to $387.66 per share. This is about 13.7% higher than the current price, indicating that Waters may be undervalued by the market.
Our Discounted Cash Flow (DCF) analysis suggests Waters is undervalued by 13.7%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The Price-to-Earnings (PE) ratio is a favored metric when assessing profitable companies like Waters, as it directly relates a company’s share price to the amount of net income it generates. This ratio serves as a quick gauge for how much investors are willing to pay today for one dollar of earnings, offering insight into market expectations for future growth or risk.
It’s important to remember that a “normal” or fair PE ratio isn’t one-size-fits-all. Companies with faster growth, higher profit margins, or lower risk profiles typically command higher PE multiples, while slower-growing or riskier businesses trade at lower ones. These expectations also shape the broader industry averages and what peers are worth.
Waters currently trades at a PE ratio of 30x. This figure lands just below the Life Sciences industry average of 33x but stands above the average of its peers at 25.8x. However, simply comparing these numbers does not tell the whole story. That is where Simply Wall St’s proprietary Fair Ratio comes in. The Fair Ratio, calculated at 22.3x, adjusts for Waters’ earnings growth, profit margin, risk factors, and its standing in the industry and market overall. This tailored approach gives a much clearer reading than raw industry or peer comparisons, focusing on what the company deserves to be valued at given its unique strengths and risks.
Comparing Waters’ actual PE to its Fair Ratio, the stock is trading at a premium, higher than its fundamentals suggest is warranted. While Waters is a quality company, its PE today looks a bit stretched relative to its growth and risk profile.
Earlier, we mentioned that there’s an even better way to understand valuation. Let’s introduce you to Narratives. A Narrative is your personal story or perspective about a company, showing what you believe about its future and how that translates into numbers like fair value, revenue, earnings, and margins. Narratives connect the dots between Waters’ real-world business outlook, your forecasts, and a clear, data-driven estimate of what the company should be worth.
Narratives bring investing to life by letting you build and share your view of Waters, whether you’re optimistic about its pharmaceutical R&D pipeline or cautious due to merger risks. Within Simply Wall St’s Community page (used by millions of investors), Narratives are easy to create and compare, helping you quickly see how fair value stacks up against the current share price so you can decide when to buy or sell. The best part is that Narratives update automatically as new earnings or news arrives, so your perspective stays relevant.
For example, some Narratives on Waters reflect a bullish scenario betting on robust pharma growth and successful integration of new businesses, setting a fair value near $460 per share. The most cautious expect lingering risks to hold the value closer to $300 per share. Which story best fits how you see Waters?
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.
