We assign a fundamental rating of 6 out of 10 to WAT. WAT was compared to 58 industry peers in the Life Sciences Tools & Services industry. WAT has outstanding health and profitabily ratings, belonging to the best of the industry. This is a solid base for any company. WAT has a correct valuation and a medium growth rate. This makes WAT very considerable for quality investing!

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1. Profitability

2. Health

3. Growth

4. Valuation

5. Dividend

1. Profitability

1.1 Basic Checks

WAT had positive earnings in the past year.
In the past year WAT had a positive cash flow from operations.
Each year in the past 5 years WAT has been profitable.
In the past 5 years WAT always reported a positive cash flow from operatings.

1.2 Ratios

Looking at the Return On Assets, with a value of 13.34%, WAT belongs to the top of the industry, outperforming 94.83% of the companies in the same industry.
With an excellent Return On Equity value of 27.84%, WAT belongs to the best of the industry, outperforming 93.10% of the companies in the same industry.
WAT has a better Return On Invested Capital (19.60%) than 93.10% of its industry peers.
WAT had an Average Return On Invested Capital over the past 3 years of 22.94%. This is significantly above the industry average of 13.29%.

		Industry Rank	Sector Rank
ROA	13.34%
ROE	27.84%
ROIC	19.6%

ROA(3y)16.49%

ROA(5y)18.04%

ROE(3y)77%

ROE(5y)128.85%

ROIC(3y)22.94%

ROIC(5y)25.43%

1.3 Margins

WAT has a better Profit Margin (20.89%) than 96.55% of its industry peers.
WAT's Profit Margin has declined in the last couple of years.
WAT's Operating Margin of 26.54% is amongst the best of the industry. WAT outperforms 94.83% of its industry peers.
In the last couple of years the Operating Margin of WAT has remained more or less at the same level.
WAT has a better Gross Margin (58.96%) than 75.86% of its industry peers.
WAT's Gross Margin has been stable in the last couple of years.

		Industry Rank	Sector Rank
OM	26.54%
PM (TTM)	20.89%
GM	58.96%

OM growth 3Y-1.6%

OM growth 5Y-0.88%

PM growth 3Y-4.65%

PM growth 5Y-2.61%

GM growth 3Y0.51%

GM growth 5Y0.43%

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ROA

ROE

ROIC

Operating and Profit Margin

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2. Health

2.1 Basic Checks

WAT has a Return on Invested Capital (ROIC), which is well above the Cost of Capital (WACC), which means it is creating value.
The number of shares outstanding for WAT has been increased compared to 1 year ago.
Compared to 5 years ago, WAT has less shares outstanding
WAT has a better debt/assets ratio than last year.

2.2 Solvency

WAT has an Altman-Z score of 9.82. This indicates that WAT is financially healthy and has little risk of bankruptcy at the moment.
WAT has a better Altman-Z score (9.82) than 89.66% of its industry peers.
The Debt to FCF ratio of WAT is 2.34, which is a good value as it means it would take WAT, 2.34 years of fcf income to pay off all of its debts.
Looking at the Debt to FCF ratio, with a value of 2.34, WAT belongs to the top of the industry, outperforming 86.21% of the companies in the same industry.
A Debt/Equity ratio of 0.41 indicates that WAT is not too dependend on debt financing.
The Debt to Equity ratio of WAT (0.41) is comparable to the rest of the industry.

		Industry Rank	Sector Rank
Debt/Equity	0.41
Debt/FCF	2.34
Altman-Z	9.82

ROIC/WACC1.79

WACC10.98%

2.3 Liquidity

WAT has a Current Ratio of 1.53. This is a normal value and indicates that WAT is financially healthy and should not expect problems in meeting its short term obligations.
WAT's Current ratio of 1.53 is on the low side compared to the rest of the industry. WAT is outperformed by 70.69% of its industry peers.
WAT has a Quick Ratio of 1.08. This is a normal value and indicates that WAT is financially healthy and should not expect problems in meeting its short term obligations.
WAT's Quick ratio of 1.08 is on the low side compared to the rest of the industry. WAT is outperformed by 75.86% of its industry peers.
The current and quick ratio evaluation for WAT is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.

		Industry Rank	Sector Rank
Current Ratio	1.53
Quick Ratio	1.08

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WACC

Debt/Equity

How to determine the health of a company

Altman-Z score

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3. Growth

3.1 Past

The Earnings Per Share has grown by an nice 11.50% over the past year.
WAT shows a small growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 5.53% yearly.
Looking at the last year, WAT shows a small growth in Revenue. The Revenue has grown by 6.90% in the last year.
WAT shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 4.21% yearly.

EPS 1Y (TTM)11.5%

EPS 3Y1.89%

EPS 5Y5.53%

EPS Q2Q%16.04%

Revenue 1Y (TTM)6.9%

Revenue growth 3Y2.02%

Revenue growth 5Y4.21%

Sales Q2Q%8.05%

3.2 Future

The Earnings Per Share is expected to grow by 10.30% on average over the next years. This is quite good.
Based on estimates for the next years, WAT will show a small growth in Revenue. The Revenue will grow by 6.59% on average per year.

EPS Next Y11.55%

EPS Next 2Y10.34%

EPS Next 3Y10.3%

EPS Next 5Y10.3%

Revenue Next Year7.43%

Revenue Next 2Y6.88%

Revenue Next 3Y6.7%

Revenue Next 5Y6.59%

3.3 Evolution

When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is accelerating.
The Revenue growth rate is accelerating: in the next years the growth will be better than in the last years.

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4. Valuation

4.1 Price/Earnings Ratio

The Price/Earnings ratio is 30.72, which means the current valuation is very expensive for WAT.
WAT's Price/Earnings ratio is a bit cheaper when compared to the industry. WAT is cheaper than 68.97% of the companies in the same industry.
Compared to an average S&P500 Price/Earnings ratio of 28.87, WAT is valued at the same level.
WAT is valuated quite expensively with a Price/Forward Earnings ratio of 26.99.
Based on the Price/Forward Earnings ratio, WAT is valued a bit cheaper than 75.86% of the companies in the same industry.
Compared to an average S&P500 Price/Forward Earnings ratio of 25.96, WAT is valued at the same level.

		Industry Rank	Sector Rank
PE	30.72
Fwd PE	26.99

4.2 Price Multiples

Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of WAT indicates a somewhat cheap valuation: WAT is cheaper than 68.97% of the companies listed in the same industry.
67.24% of the companies in the same industry are more expensive than WAT, based on the Price/Free Cash Flow ratio.

		Industry Rank	Sector Rank
P/FCF	38.56
EV/EBITDA	23.59

4.3 Compensation for Growth

The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates an expensive valuation of the company.
WAT has an outstanding profitability rating, which may justify a higher PE ratio.