DCF Studio

    WAT · NYQ · Healthcare

    Waters Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 135.52

    Market price

    USD 421.63

    Implied upside

    -67.9%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 41.9x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 135.52-67.9%
    Exit multiple
    USD 280.64-33.4%
    Market price
    USD 421.63

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m391m781mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 3.2bnUSD 3.3bnUSD 3.4bnUSD 3.4bnUSD 3.5bn+2.1%
    EBITUSD 897.5mUSD 916.5mUSD 936.0mUSD 955.8mUSD 976.1m+2.1%
    NOPATUSD 761.2mUSD 777.3mUSD 793.8mUSD 810.7mUSD 827.9m+2.1%
    Add depreciation & amortisationUSD 185.9mUSD 189.8mUSD 193.8mUSD 198.0mUSD 202.2m+2.1%
    Less capital expenditureUSD -161.5mUSD -164.9mUSD -168.4mUSD -172.0mUSD -175.7m+2.1%
    Less increase in working capitalUSD -67.2mUSD -68.6mUSD -70.1mUSD -71.6mUSD -73.1m+2.1%
    Free cashflow to firmUSD 718.3mUSD 733.6mUSD 749.2mUSD 765.1mUSD 781.3m+2.1%
    Discount factor0.94930.85540.77090.69470.6260-
    Present valueUSD 681.9mUSD 627.5mUSD 577.5mUSD 531.5mUSD 489.1m-8.0%
    Present Value Of The ForecastUSD 2.9bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.130Reported 1.194, pulled toward 1.0 (Blume)
    Cost of equity11.21%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 41.4bn96.5% of capital
    Total debtUSD 1.5bn3.5% of capital, book value as a proxy
    Tax rate15.2%Effective, capped at statutory
    WACC10.97%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 135.52

    68% of EV

    Forecast FCFF, final year
    USD 781.3m
    Capex at depreciation, working capital in reinvestment
    USD 917.3m
    Less reinvestment at g/ROIC (12.4% of NOPAT)
    USD -113.7m
    Capitalised
    USD 803.6m
    ROIC (reported)
    20.2%
    Terminal value, undiscounted
    USD 9.7bn
    Terminal value, discounted
    USD 6.1bn
    Enterprise value
    USD 9.0bn
    Less net debt
    USD 903.3m
    Equity value
    USD 8.1bn

    Exit at 20.0x EBITDA

    Value per shareUSD 280.64

    84% of EV

    Terminal value, undiscounted
    USD 23.6bn
    Terminal value, discounted
    USD 14.8bn
    Enterprise value
    USD 17.7bn
    Less net debt
    USD 903.3m
    Equity value
    USD 16.8bn

    Spread between methods: 70%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    8.97%166.96173.29180.55188.98198.91
    9.97%145.72150.09155.02160.62167.05
    10.97%128.98132.08135.52139.37143.69
    11.97%115.44117.69120.14122.85125.85
    12.97%104.28105.93107.70109.64111.75

    Outlined: this model. Green text: above today's price of 421.63. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year2.1%37.7%+35.5pp
    EBIT margin27.8%83.1%+55.3pp
    Discount rate11.0%5.4%-5.6pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.