On the four Ms, Waters Corporation earns 100 for management and 41 for moat. The management score rests on a return on invested capital of 17.6% and a gross margin of 57.8% — figures that describe a business turning capital into profit efficiently. Debt sits at 0.58x equity. The moderate moat and exceptional management are not the same judgement, and the gap between them is where the argument about this business sits.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 6.0% a year, the rate measured from the filings. The exit multiple assumed is 12.0x. That produces an intrinsic value of $21.30, a 10-CAP price of $45.20 and a payback time price of $47.42, with the value zone set at the highest of the three, $47.42. Today's price of $425.71 is 798% above it.
The operating figures describe a business performing at a high level; the price asks for that performance to continue and then some. A margin of safety score of 3 is the measure of how little room that leaves for being wrong.
| Price | $425.71 |
| Market cap | $41.8B |
| P/E ratio | 106.2x |
| Return on invested capital | 17.6% |
| Gross margin | 57.8% |
| Debt to equity | 0.58x |
| Free cash flow yield | 2.4% |
| Growth rate used | 6.0% |
| Growth rate measured | 6.0% |
| Exit multiple assumed | 12.0x |
| Company | Moat | Buy price |
| Idexx Laboratories (IDXX) | 97 | $197.94 |
| IQVIA (IQV) | 73 | $178.19 |
| Illumina, Inc. (ILMN) | 48 | $67.65 |
| Agilent Technologies (A) | 64 | $53.70 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Waters Corporation rather than accepting ours.