Watts Water Technologies (WTS) AI Stock Analysis

• Market Cap: $8.15B
• Dividend Yield: 0.7%
• Average Volume (3M): 231.40K
• Price to Earnings (P/E): 27.9
• Beta (1Y): 0.98
• Revenue Growth: 3.89%
• EPS Growth: 8.17%
• Country: US
• Employees: 4,800
• Sector: Industrials
• Sector Strength: 91
• Industry: Industrial - Machinery
• EPS (TTM): 2.37
• Shares Outstanding: 27,422,200
• 10 Day Avg. Volume: 273,486
• 30 Day Avg. Volume: 231,399
• PEG Ratio: 6.47
• Price to Book (P/B): 4.63
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 24.23
• Enterprise Value/Market Cap: 0.95
• Enterprise Value/Revenue: 0.87
• Enterprise Value/Gross Profit: 7.25
• Enterprise Value/Ebitda: 4.40
• 1Y Price Target: $204.50
• Price Target Upside: -16.23% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 4

Watts Water Technologies earns a solid score based on its robust financial health, effective strategies to manage operational challenges, and positive market momentum. While the stock shows strength, potential overvaluation and market-specific weaknesses, particularly in Europe, present risks that investors should consider. The company’s proactive approach to tariffs and dividend increase reflect management's strategic foresight, balancing the score.

Positive Factors

Market Share and Margins

Watts' domestic manufacturing footprint allowed them to gain market share and drive margins due to better product availability.

Smart & Connected Strategy

The company's push into Smart & Connected is viewed positively, with the data center exposure being a rapidly growing area to monitor.

Trade Policy Benefits

Watts could be a net beneficiary of U.S. trade policy with more domestic production than competitors who source more heavily from China.

Negative Factors

Construction Market Uncertainty

The trajectory of interest rates makes it tough to confidently predict a major rebound in US construction activity, which is a significant part of the company's sales.

European Market Concerns

There are few clear catalysts for a re-rating, and the company's Europe exposure could continue to be an ongoing issue.

Uncertainty in Global Trade

Uncertainty around global trading rules and trade freezes between the U.S. and China are expected to persist, posing challenges for investments.

Watts Water Technologies Business Overview & Revenue Model

Company Description

Watts Water Technologies, Inc. designs, manufactures, and sells products, solution, and systems that manage and conserve the flow of fluids and energy into, through and out of buildings in the commercial and residential markets in the Americas, Europe, the Asia-Pacific, the Middle East, and Africa. The company offers residential and commercial flow control products, including backflow preventers, water pressure regulators, temperature and pressure relief valves, and thermostatic mixing valves. It also provides heating, ventilation, and air conditioning and gas products, such as boilers, water heaters, custom heat, and hot water solutions; hydronic and electric heating systems for under-floor radiant applications; custom heat and hot water solutions; hydronic pump groups for boiler manufacturers and alternative energy control packages; and flexible stainless steel connectors for natural and liquid propane gas in commercial food service and residential applications. In addition, the company offers drainage and water re-use products comprising drainage products and engineered rain water harvesting solutions for commercial, industrial, marine, and residential applications; and water quality products that include point-of-use and point-of-entry water filtration, conditioning, and scale prevention systems for commercial and residential applications. Further, it provides smart mixing system under the IntelliStation name. The company sells its products to plumbing, heating, and mechanical wholesale distributors and dealers, as well as original equipment manufacturers, specialty product distributors, do-it-yourself chains, and retail chains; and directly to wholesalers and private label accounts. Watts Water Technologies, Inc. was founded in 1874 and is headquartered in North Andover, Massachusetts.

How the Company Makes Money

Watts Water Technologies makes money through the design, manufacturing, and sale of its extensive portfolio of water-related products. The company's revenue streams are primarily generated from the sale of plumbing, heating, and water quality products to a diverse customer base, including wholesalers, contractors, engineers, and building owners. Key revenue drivers include the demand for water efficiency and safety solutions, particularly in the context of increasing regulatory standards and sustainability goals. The company also benefits from strategic partnerships and acquisitions, which expand its product offerings and market reach. Moreover, Watts Water Technologies leverages its global presence to tap into emerging markets where infrastructure development is on the rise.

Watts Water Technologies Financial Statement Overview

Summary

Watts Water Technologies exhibits strong financial health across all verticals. The company shows robust revenue and profit growth, efficient cost management, and strong cash flow generation. The balance sheet is stable with low leverage, and overall, the company is well-positioned for future growth with minimal financial risks.

Income Statement

Watts Water Technologies shows strong performance with a steadily increasing revenue over the years. The Gross Profit Margin is robust at approximately 47.1% in the latest year, indicating efficient cost management. The Net Profit Margin has improved to about 12.9% in the latest year, reflecting growing profitability. The EBIT and EBITDA margins are consistent, demonstrating operational efficiency. There is a positive revenue growth trajectory, with revenue growth of 9.5% from 2023 to 2024.

Balance Sheet

The company maintains a solid financial position with a Debt-to-Equity Ratio of approximately 0.12, indicating low leverage and financial risk. The Return on Equity is healthy at 17.1%, showcasing effective utilization of equity capital to generate profits. The Equity Ratio stands at 71.3%, reflecting a strong equity base relative to total assets. Overall, the balance sheet stability is commendable, with a low risk of financial distress.

Cash Flow

Watts Water Technologies demonstrates strong cash flow generation capabilities. The Free Cash Flow has grown by 15.9% from 2023 to 2024, indicating good capital management. The Operating Cash Flow to Net Income Ratio is 1.24, showing efficient conversion of net income into cash flow. The Free Cash Flow to Net Income Ratio is 1.12, further reflecting efficient cash utilization. The company’s cash flow position supports continued investment and financial flexibility.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
2.25B	2.06B	1.98B	1.81B	1.51B
	Gross Profit
1.06B	960.90M	874.30M	767.10M	625.40M
	EBIT
390.40M	356.40M	315.00M	239.60M	181.10M
	EBITDA
455.10M	401.00M	354.30M	285.50M	226.80M
	Net Income Common Stockholders
291.20M	262.10M	251.50M	165.70M	114.30M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
386.90M	350.10M	310.80M	242.00M	218.90M
	Total Assets
2.40B	2.31B	1.93B	1.86B	1.74B
	Total Debt
197.00M	298.30M	147.60M	141.90M	198.20M
	Net Debt
-189.90M	-51.80M	-163.20M	-100.10M	-20.70M
	Total Liabilities
689.10M	796.10M	630.30M	682.40M	668.40M
	Stockholders Equity
1.71B	1.51B	1.30B	1.17B	1.07B
Cash Flow		Free Cash Flow
325.80M	281.10M	195.90M	154.10M	185.00M
	Operating Cash Flow
361.10M	310.80M	224.00M	180.80M	228.80M
	Investing Cash Flow
-124.70M	-343.10M	-22.90M	-30.70M	-54.80M
	Financing Cash Flow
-190.50M	69.00M	-121.70M	-118.60M	-181.90M

Watts Water Technologies Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 244.11
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WTS, the sentiment is Positive. The current price of 244.11 is above the 20-day moving average (MA) of 219.40, above the 50-day MA of 209.80, and above the 200-day MA of 205.21, indicating a bullish trend. The MACD of 10.77 indicates Negative momentum. The RSI at 73.22 is Negative, neither overbought nor oversold. The STOCH value of 83.39 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for WTS.

Watts Water Technologies Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SPXC	80 Outperform	$7.29B	36.07	15.24%	―	10.78%	30.05%
WTS	78 Outperform	$8.15B	27.95	17.61%	0.70%	3.89%	8.17%
MWA	76 Outperform	$4.01B	27.99	17.68%	1.02%	10.96%	43.44%
THR	75 Outperform	$1.02B	22.07	9.75%	―	0.48%	-5.52%
AOS	71 Outperform	$10.02B	19.72	27.97%	1.90%	-1.60%	-7.12%
FLS	70 Outperform	$6.75B	24.21	14.00%	1.63%	4.23%	20.40%
Sector *	64 Neutral	$4.43B	12.01	5.16%	249.23%	4.03%	-11.73%

Watts Water Technologies Corporate Events

Watts Water Reports Strong Q3 2024 Performance

Watts Water Technologies announced a robust third quarter for 2024, with sales hitting $544 million, marking an 8% increase despite organic sales dipping 4%. The company is navigating economic challenges effectively, focusing on customer service and productivity, which led them to raise their full-year operating margin outlook. Additionally, the upcoming retirement of CFO Shashank Patel was announced, with a search underway for his successor. The firm continues to leverage strong cash flow and strategic investments to drive future growth.