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US Equities · Finance research note

WAT — Waters Corporation

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Evidence and analysis

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2. Company Fundamentals

2.1 Competitiveness

Metric Value
Operating Margins 2.84%
Profit Margins 11.93%
Return on Equity 5.21%
Return on Assets 3.31%
Free Float 0.1B
Short Int % Utilisation 4.56%

2.2 Growth

Metric Value
Revenue Growth 91.4%
Free Cash Flow -0.5B
EBITDA 35.95 (Ratio)
Enterprise Value 40.8B
EV/Revenue 10.82
EV/EBITDA 35.95

Revenue growth of 91.4% places the company in a high-growth category.

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.)* 51.44%
Risk / Std Dev (Ann.)* 36.43%
1-Year Price Return* 41.37%

Latest Market Data (as of 2026-08-14, US Eastern time):

Metric Value
Last Price $412.17
52-Week Range $282.77 – $420.26
Observation Count 251 trading days

The return and risk statistics use daily adjusted closes from the retrieved one-year series and annualise daily moments using 252 trading days. The last price is the latest regular-market price reported for the stated date. Source: Yahoo Finance market data.

DuPont Model Analysis

The DuPont model decomposes return on equity (ROE) into three operating and capital-structure drivers:

ROE = Net Margin × Asset Turnover × Equity Multiplier

The comparison uses the latest two comparable annual periods available for the issuer, with reported statement amounts shown in US$. Revenue and net income are income-statement flows; total assets and shareholders’ equity are year-end balance-sheet figures. This is a simplified year-end-balance DuPont comparison rather than an average-balance ROE calculation.

DuPont component Calculation FY2025 FY2024
Revenue Reported revenue $3.17B $2.96B
Net income Reported net income $642.63M $637.83M
Total assets Year-end reported balance $5.08B $4.55B
Shareholders’ equity Year-end reported balance $2.56B $1.83B
Net margin Net income ÷ revenue 20.30% 21.56%
Asset turnover Revenue ÷ total assets 0.6235x 0.6497x
Equity multiplier Total assets ÷ shareholders’ equity 1.9821x 2.4904x
ROE Net margin × asset turnover × equity multiplier 25.09% 34.88%

Source: Yahoo Finance annual statements. Values are based on the two latest comparable annual periods returned by the source; fiscal period labels use the statement period-end year.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue $3.17B
Prior annual revenue $2.96B
EBIT $824.43M
Tax rate 14.90%
NOPAT = EBIT × (1 − tax rate) $701.59M
Forecast start-growth basis 6.99%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT $701.59M
Add: depreciation & amortisation $206.24M
Less: capital expenditure -$112.75M
Less/(add): working-capital cash-flow movement -$233.38M
Current unlevered FCFF $561.70M

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 6.99% $750.65M $220.66M -$120.63M -$249.70M $600.98M $570.55M
2 5.87% $794.72M $233.61M -$154.19M -$264.36M $609.78M $521.76M
3 4.75% $832.44M $244.70M -$189.24M -$276.91M $610.99M $471.20M
4 3.62% $862.60M $253.57M -$224.83M -$286.95M $604.40M $420.10M
5 2.50% $884.17M $259.91M -$259.91M -$294.12M $590.05M $369.65M

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 1.18
Cost of equity 11.22%
Pre-tax cost of debt 4.36%
WACC 10.95%
WACC validation within standard range

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value $7.16B
Implied terminal EV / EBITDA 5.51x
Terminal value as % of enterprise value 64.39%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF $2.35B
Present value of terminal value $4.26B
Indicated enterprise value $6.61B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value $6.61B
Less: gross interest-bearing debt $1.49B
Add: cash and equivalents $587.83M
Add: affiliate investments $0.00
Less: minority interests $0.00
Indicated common equity value $5.71B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 59,706,000.00
Share-count basis reported diluted weighted-average shares
Current market price $404.09
DCF indicative value per share $95.57
Indicative value vs. market price -76.35%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range pass
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% review required

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 3/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 17:54:04.082769 UTC; latest reported fiscal period: 2025-12-31 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

2.7 Quantitative Factor Diagnostics

Model basis: Daily issuer USD excess returns are regressed in-sample using ordinary least squares on matching regional Fama–French factors. FF3 estimates market, size, and value loadings; FF5 adds profitability and investment. Coefficients are descriptive historical exposures, not predictions.

Estimation input Value
Regional factor set US
Factor-return currency USD
Issuer-return basis USD adjusted total return
Estimation window 2025-08-19 to 2026-06-30
Aligned daily observations 217
Minimum observation requirement 120
Currency conversion for HK listings not required

Fama–French Three-Factor and Five-Factor Results

Diagnostic FF3 FF5
Annualised alpha 9.51% 20.63%
Adjusted R² 0.14 0.18
Annualised residual volatility 34.49% 33.54%
Factor loading (t-statistic) FF3 FF5
Market excess return (Mkt-RF) 0.80 (3.94) 1.05 (4.61)
Size (SMB) 0.85 (3.09) 0.58 (2.02)
Value (HML) 0.23 (0.96) -0.35 (-1.23)
Profitability (RMW) NM 0.07 (0.29)
Investment (CMA) NM 1.39 (3.33)

Definitions: Mkt-RF is the market return less the risk-free rate; SMB is small minus big; HML is high minus low book-to-market; RMW is robust minus weak profitability; CMA is conservative minus aggressive investment. Factor returns are sourced from the Kenneth R. French Data Library; issuer adjusted-return history is sourced from Yahoo Finance. For Hong Kong listings, adjusted HKD prices are converted into USD with daily USD/HKD closes before return calculation to match the USD regional factor basis. This is an in-sample historical regression; coefficients and t-statistics do not establish causation or predict future returns. This is research and analysis only, not personalized financial advice.

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