3 Reasons We're Fans of Watts Water Technologies (WTS)

Watts Water Technologies trades at $267.30 per share and has stayed right on track with the overall market, gaining 9% over the last six months. At the same time, the S&P 500 has returned 13.4%.

Is now a good time to buy WTS? Find out in our full research report, it’s free for active Edge members.

Why Are We Positive On Watts Water Technologies?

Founded in 1874, Watts Water (NYSE:WTS) specializes in manufacturing water products and systems for residential, commercial, and industrial applications globally.

1. Long-Term Revenue Growth Shows Strong Momentum

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, Watts Water Technologies’s 9.3% annualized revenue growth over the last five years was solid. Its growth surpassed the average industrials company and shows its offerings resonate with customers.

2. Elite Gross Margin Powers Best-In-Class Business Model

At StockStory, we prefer high gross margin businesses because they indicate the company has pricing power or differentiated products, giving it a chance to generate higher operating profits.

Watts Water Technologies has best-in-class unit economics for an industrials company, enabling it to invest in areas such as research and development. Its margin also signals it sells differentiated products, not commodities. As you can see below, it averaged an elite 45.9% gross margin over the last five years. Said differently, roughly $45.86 was left to spend on selling, marketing, R&D, and general administrative overhead for every $100 in revenue.

3. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Watts Water Technologies’s EPS grew at an astounding 21.8% compounded annual growth rate over the last five years, higher than its 9.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

These are just a few reasons Watts Water Technologies is a rock-solid business worth owning, but at $267.30 per share (or 24.6× forward P/E), is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free for active Edge members .

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