Advanced Drainage Systems (WMS) AI Stock Analysis

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Advanced Drainage Systems

(NYSE:WMS)

72Outperform

Advanced Drainage Systems has a solid financial base with strong income performance, though it faces challenges with high leverage. The technical analysis shows a slight negative trend, and while the stock is fairly valued, the earnings call presents a mixed outlook with positive and negative elements balancing each other out. These factors result in a moderately positive overall stock score.

Positive Factors

Growth Potential

Orenco has an ideal strategic fit alongside Infiltrator and should notably accelerate ADS' growth in the advanced wastewater treatment space.

Mergers and Acquisitions

ADS announced its agreement to acquire Orenco Systems, a leading manufacturer of advanced onsite septic wastewater treatment products.

Negative Factors

Financial Guidance

The FY'25 guidance cut reflects softness on all fronts: weaker end markets, higher raw material costs, and a market that is not receptive to cost-based price increases.

Market Challenges

Incremental headwinds are emerging for WMS, including material cost pressures and a more challenged end market backdrop.

Advanced Drainage Systems (WMS) vs. S&P 500 (SPY)

Market Cap

$7.76B

Dividend Yield0.64%

Average Volume (3M)674.26K

Price to Earnings (P/E)16.7

Beta (1Y)1.36

Revenue Growth3.67%

EPS Growth-5.03%

CountryUS

Employees5,705

SectorIndustrials

Sector Strength64

IndustryConstruction

Share Statistics

EPS (TTM)5.98

Shares Outstanding77,574,660

10 Day Avg. Volume641,088

30 Day Avg. Volume674,257

Financial Highlights & Ratios

PEG Ratio3.44

Price to Book (P/B)N/A

Price to Sales (P/S)2.85

Price to Cash Flow (P/CF)11.10

P/FCF Ratio11.10

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$140.71

Price Target Upside45.38% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering7

Advanced Drainage Systems Business Overview & Revenue Model

Company DescriptionAdvanced Drainage Systems, Inc. designs, manufactures, and markets thermoplastic corrugated pipes and related water management products, and drainage solutions for use in the underground construction and infrastructure marketplace in the United States, Canada, Mexico, and internationally. The company operates through Pipe, International, Infiltrator, and Allied Products & Other segments. It offers single, double, and triple wall corrugated polypropylene and polyethylene pipes; plastic leachfield chambers and systems, EZflow synthetic aggregate bundles, mechanical aeration wastewater solutions, septic tanks and accessories, and combined treatment and dispersal systems; and allied products, including storm retention/detention and septic chambers, polyvinyl chloride drainage structures, fittings, and water quality filters and separators. The company also purchases and distributes construction fabrics and other geosynthetic products for soil stabilization, reinforcement, filtration, separation, erosion control, and sub-surface drainage, as well as drainage grates and other products. It offers its products for non-residential, residential, agriculture, and infrastructure applications through a network of approximately 38 distribution centers. The company was incorporated in 1966 and is headquartered in Hilliard, Ohio.

How the Company Makes MoneyAdvanced Drainage Systems generates revenue through the sale of its comprehensive range of water management products and solutions. The company primarily earns money from its core product lines, which include corrugated high-density polyethylene (HDPE) pipes, polypropylene pipes, and related fittings and accessories. These products are essential for effective stormwater management, wastewater management, and drainage applications. The company also provides various water management solutions that enhance its product offerings, such as stormwater treatment units and water storage systems. Key revenue streams include sales to construction and infrastructure development projects, agricultural sectors, and residential markets. Additionally, Advanced Drainage Systems benefits from strategic partnerships with distributors and contractors, facilitating broader market reach and increased sales opportunities. Factors such as increasing regulations on water management and the growing need for sustainable infrastructure solutions further contribute to the company's financial performance.

Advanced Drainage Systems Financial Statement Overview

Summary

Advanced Drainage Systems exhibits strong financial health with high income statement metrics and reasonable cash flow performance. The balance sheet reveals high leverage, but operational and financial management are effective, indicating solid positioning in the construction industry.

Income Statement

Very Positive

Advanced Drainage Systems has shown strong financial performance with a high gross profit margin and consistent net profit margins over the years. Revenue growth is stable, indicating a positive trend in income. The company also maintains healthy EBIT and EBITDA margins, showcasing efficient operational management.

Balance Sheet

Positive

The balance sheet reflects moderate financial stability. The debt-to-equity ratio is relatively high, indicating significant leverage, but the company has managed to maintain a reasonable return on equity. The equity ratio suggests a balanced approach to financing through debt and equity, though there is room for improvement in reducing debt levels.

Cash Flow

Positive

Cash flow analysis shows satisfactory performance with a stable operating cash flow to net income ratio. Free cash flow growth has been inconsistent, but overall, the cash flow generation aligns well with net income, indicating efficient cash utilization. However, greater consistency in free cash flow growth is desirable.

TTM	Mar 2024	Mar 2023	Mar 2022	Mar 2021	Mar 2020
Breakdown
Income Statement		Total Revenue
2.94B	2.87B	3.07B	2.77B	1.98B	1.67B
	Gross Profit
1.09B	1.15B	1.12B	800.38M	690.08M	316.48M
	EBIT
678.43M	732.13M	719.31M	411.92M	344.52M	-90.01M
	EBITDA
866.74M	907.39M	868.46M	554.55M	493.51M	28.04M
	Net Income Common Stockholders
467.84M	509.92M	507.09M	271.33M	224.23M	-193.71M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
5.33M	490.16M	217.13M	20.13M	195.01M	174.23M
	Total Assets
885.95M	3.27B	2.90B	2.65B	2.41B	2.37B
	Total Debt
306.26M	1.41B	1.32B	944.64M	841.50M	1.16B
	Net Debt
300.93M	915.69M	1.11B	924.51M	646.49M	987.97M
	Total Liabilities
545.63M	1.99B	1.91B	1.54B	1.35B	1.59B
	Stockholders Equity
318.20M	1.26B	977.37M	1.09B	1.05B	772.82M
Cash Flow		Free Cash Flow
344.09M	534.12M	540.90M	125.81M	373.46M	238.51M
	Operating Cash Flow
557.93M	717.93M	707.81M	274.89M	452.22M	306.19M
	Investing Cash Flow
-442.67M	-155.66M	-214.48M	-198.83M	-77.87M	-1.15B
	Financing Cash Flow
-183.85M	-284.34M	-296.28M	-251.07M	-354.58M	1.01B

Advanced Drainage Systems Technical Analysis

Technical Analysis Sentiment

Negative

Last Price96.79

Price Trends

50DMA

113.84

Negative

100DMA

119.01

Negative

200DMA

137.01

Negative

Market Momentum

MACD

-1.65

Negative

RSI

43.47

Neutral

STOCH

41.10

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WMS, the sentiment is Negative. The current price of 96.79 is below the 20-day moving average (MA) of 107.81, below the 50-day MA of 113.84, and below the 200-day MA of 137.01, indicating a bearish trend. The MACD of -1.65 indicates Negative momentum. The RSI at 43.47 is Neutral, neither overbought nor oversold. The STOCH value of 41.10 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for WMS.

Advanced Drainage Systems Risk Analysis

Advanced Drainage Systems disclosed 26 risk factors in its most recent earnings report. Advanced Drainage Systems reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Advanced Drainage Systems Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AZEK	74 Outperform	$6.42B	43.58	10.73%	―	6.59%	30.00%
SSD	74 Outperform	$6.03B	18.89	18.49%	0.77%	0.83%	-8.08%
WMS	72 Outperform	$7.76B	16.74	34.07%	0.64%	3.67%	-5.03%
LPX	72 Outperform	$5.79B	14.06	26.08%	1.27%	13.95%	138.97%
IBP	72 Outperform	$4.57B	18.10	37.31%	0.86%	5.86%	5.81%
TREX	65 Neutral	$5.69B	24.25	28.90%	―	5.17%	10.39%
Sector *	62 Neutral	$7.16B	12.21	3.05%	3.43%	3.62%	-14.48%

* Industrials Sector Average

Performance Comparison

WMS

Advanced Drainage Systems

96.79

-67.67

-41.15%

LPX

Louisiana-Pacific

81.16

4.51

5.88%

SSD

Simpson Manufacturing Co

139.81

-41.89

-23.05%

TREX

Trex Company

50.52

-41.60

-45.16%

IBP

Installed Building Products

157.66

-78.54

-33.25%

AZEK

AZEK Company

43.39

-4.56

-9.51%

Advanced Drainage Systems Earnings Call Summary

Earnings Call Date: Feb 6, 2025 | % Change Since: -16.45% | Next Earnings Date: May 15, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mix of positive and negative elements. On the positive side, the company experienced growth in net sales and strong performance in the residential and non-residential markets. The acquisition of Orenco was a notable contributor to sales. However, the decrease in adjusted EBITDA, infrastructure market decline, and increased capital spending are significant challenges. The sentiment is neutral as the highlights and lowlights appear to be balanced.

Highlights

Increase in Net Sales

Net sales increased by 4% to $691 million, including the acquisition of Orenco.

Residential Market Growth

Sales in the residential market, which are about 35% of total revenue, increased by 9%.

Non-Residential Market Performance

Sales in the non-residential market increased by 7% as demand improved, which is about 45% of total sales.

Expansion in Georgia

Broke ground on an expansion of the ADS recycling facility in Cordele, Georgia, to increase recycling capacity.

Orenco Acquisition Contribution

Orenco contributed $25 million of sales in the period, slightly ahead of expectations.

Positive Outlook for Infrastructure

Despite a decline, the infrastructure market is positioned well with favorable long-term indicators.

Lowlights

Decrease in Adjusted EBITDA

Adjusted EBITDA decreased by 6% year-over-year to $191 million.

Infrastructure Market Decline

Sales in the infrastructure market were down 6% in the quarter on a difficult comparison.

Free Cash Flow Decline

Generated $374 million of free cash flow year-to-date compared to $564 million in the prior year.

Increased Capital Spending

Year-to-date capital spending increased 22% year-over-year to $166 million.

Company Guidance

During Advanced Drainage Systems' third-quarter fiscal year 2025 conference call, the company reported a 4% increase in net sales to $691 million, with the acquisition of Orenco contributing $25 million. Sales in the non-residential market, accounting for 45% of total sales, rose by 7%, while residential market sales increased by 9%, making up 35% of total revenue. The infrastructure market saw a 6% decline compared to a 22% increase the previous year. Adjusted EBITDA was down 6% year-over-year to $191 million. Year-to-date free cash flow was $374 million, with capital spending up by 22% to $166 million. The company's guidance for fiscal 2025 revenue and adjusted EBITDA remains unchanged, with a focus on continued growth and strategic investments, including an expansion of their recycling facility in Cordele, Georgia.

Advanced Drainage Systems Corporate Events

M&A TransactionsBusiness Operations and StrategyFinancial Disclosures

Advanced Drainage Systems Reports Q3 2024 Financial Results

Neutral

Feb 6, 2025

On February 6, 2025, Advanced Drainage Systems announced its fiscal third quarter results for the period ending December 31, 2024. The company’s net sales increased by 4.3% to $690.5 million, driven by demand in construction markets despite a decrease in domestic pipe sales. However, net income decreased by 23% to $82.3 million, impacted by unfavorable pricing and material costs. The acquisition of Orenco Systems expanded ADS’s offering in decentralized wastewater management, contributing to sales growth. With increasing concerns about stormwater infrastructure, ADS is focused on growing its leadership in water management solutions while expanding capacity and investing in sustainable growth.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.