WAT

We rate WATERS CORP /DE/ (WAT) as a Hold with a composite score of 51.6/100 at a current price of $326.48. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in quality (68th percentile) and stability (67th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (36th percentile) and momentum (44th percentile) tempers our overall conviction. We assign a Narrow Moat rating (51/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

WATERS CORP /DE/ holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 51.6/100 places it at rank #1765 in our full 7,333-stock universe. With a $17.4B market capitalization, WATERS CORP /DE/ operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 13%, though momentum at the 44th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 59% (+16.8pp vs sector) narrow to operating margins of 25% (+23.7pp vs sector) and net margins of 19.5%, yielding a gross-to-net conversion rate of 33%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $326.48, WATERS CORP /DE/ is trading near fair value based on current fundamentals. Our value factor score of 64/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 56.5x (a 154% premium to the sector median of 22.3x), EV/EBITDA of 44.0x (at a premium), P/B of 14.0x, P/S of 11.0x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Medium uncertainty rating to WATERS CORP /DE/. The stock presents a balanced risk profile: significant leverage (109% debt-to-equity) and elevated valuation multiple (P/E 56.5x) that leaves limited margin for error. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (109% debt-to-equity); elevated valuation multiple (P/E 56.5x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 67th percentile and quality factor at the 68th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 59% provide a buffer against cost pressures; above-average stability (67th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate WATERS CORP /DE/'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 24.8%, and the balance sheet is managed within acceptable parameters (D/E: 109%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; WATERS CORP /DE/ falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, WATERS CORP /DE/ receives a Hold rating with a composite score of 51.6/100 (rank #1765 of 7,333). Our quantitative framework assigns a Narrow Moat (51/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 56/100.

Our analysis supports a neutral stance on WATERS CORP /DE/. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.