Waters Corporation trades at $386.11 per share and has stayed right on track with the overall market, gaining 10.4% over the last six months. At the same time, the S&P 500 has returned 13.4%.

Is there a buying opportunity in Waters Corporation, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.

Why Is Waters Corporation Not Exciting?

We don't have much confidence in Waters Corporation. Here are three reasons we avoid WAT and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Unfortunately, Waters Corporation’s 6.2% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the healthcare sector.

2. Slow Organic Growth Suggests Waning Demand In Core Business

We can better understand Research Tools & Consumables companies by analyzing their organic revenue. This metric gives visibility into Waters Corporation’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.

Over the last two years, Waters Corporation’s organic revenue averaged 1.6% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Waters Corporation’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

Waters Corporation isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 28.2× forward P/E (or $386.11 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at one of our top software and edge computing picks.

Stocks We Would Buy Instead of Waters Corporation

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