Waters CorporationWATNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $581.13 per share(market-calibrated)

+89.2%

Upside to Fair Value

Current

$307.23

Pure Model

$598.87

Fair Value

$581.13

Bull Case

$828.00

Bear Case

$412.88

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $598.87.

What's Driving This Ratingfor WAT

↓

CapEx normalizing toward maintenance

Historical CapEx is 4.85% of revenue (heavy investment phase). Model fades this to 3.50% by Year 10, freeing up ~$133M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 28.53% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

⚠

Analyst growth decelerates sharply

Revenue growth drops from 103.18% in Year 1 to 4.05% by Year 5 (per analyst consensus). This growth deceleration is a key reason the model may undervalue the stock if growth re-accelerates.

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $463.69/share (16.1x terminal FCF) while exit multiple gives $734.04/share (31.8x terminal FCF). The 24x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 75.37% indicates efficient cash generation. FCF reaches $2.5B by Year 10 (25.43% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.18

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)9.80%

Cost of Debt

Pre-tax Cost of Debt4.73%

Tax Rate14.87%

After-tax Cost of Debt4.03%

Equity Weight (E/V)92.85%

Debt Weight (D/V)7.15%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (92.85% × 9.80%) + (7.15% × 4.03%)

= 9.39%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$6.4B	$7.5B	$8.3B	$9.0B	$9.9B
EBIT	$1.8B	$2.1B	$2.4B	$2.6B	$2.8B
Tax	$273M	$319M	$354M	$381M	$419M
NOPAT	$1.6B	$1.8B	$2.0B	$2.2B	$2.4B
+ Depreciation	$336M	$392M	$435M	$469M	$515M
- Capex	$312M	$342M	$355M	$355M	$345M
- Δ NWC	$641M	$82M	$64M	$62M	$56M
Free Cash Flow	$945M	$1.8B	$2.0B	$2.2B	$2.5B
Discount Factor	0.914	0.764	0.638	0.534	0.408
Present Value	$864M	$1.4B	$1.3B	$1.2B	$1.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.5B

Terminal Growth Rate3.00%

WACC9.39%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$40.5B

PV of Terminal Value$16.5B

Exit Multiple Method

Year 10 EBITDA$3.3B

Exit Multiple (EV/EBITDA)24.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$79.9B

PV of Terminal Value$32.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$11.9B

PV of Terminal Value$16.5B

Enterprise Value$28.4B

(-) Net Debt$820M

Equity Value$27.6B

Shares Outstanding60M

Price per Share$463.69

Exit Multiple Method

PV of Projected FCFs$11.9B

PV of Terminal Value$32.6B

Enterprise Value$44.5B

(-) Net Debt$820M

Equity Value$43.7B

Shares Outstanding60M

Price per Share$734.04

Pure Model Fair Value

$598.87

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.39%	$732.76	$753.83	$779.72	$812.25	$854.39
8.39%	$647.32	$660.90	$677.00	$696.39	$720.20
9.39%	$578.94	$588.18	$598.87	$611.37	$626.19
10.39%	$522.33	$528.88	$536.31	$544.82	$554.67
11.39%	$474.34	$479.13	$484.49	$490.53	$497.38

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$412.88

34.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.47

Base Case

$598.87

94.9% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.18

Bull Case

$828.00

169.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.00

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Healthcare Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth103.18%

Year 3 Revenue Growth5.90%

Year 5 Revenue Growth4.05%

Year 7 Revenue Growth3.63%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin28.53%

Tax Rate14.87%

Historical Capex / Rev4.85%

Terminal Capex / Rev3.50%

NWC / Revenue19.62%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 24x EV/EBITDA (Healthcare sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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