Value
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.6 |
| P/S | 7.7 |
| EV/EBITDA | 2.9 |
| Fwd P/E | 6.2 |
| PEG | 5.5 |
| Analyst target | 5.0 |
- ▸Forward P/E: 20.7x
- ▸PEG: 1.38
WMS · Why this verdict
Why Advanced Drainage Systems (WMS) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictHOLD
Overall score5.3/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Advanced Drainage Systems has beaten analyst earnings estimates in all four of its most recent quarters with an average positive surprise of approximately 14%, indicating consistently strong operational execution above Street forecasts. Earnings | The company continues to beat earnings estimates in at least 3 of the next 4 quarters, maintaining the positive surprise rate above 10%. | →Stable |
| CounterThe earnings beat streak coincides with analyst estimates that may have been set conservatively following a period of industry destocking; as estimates normalize higher, the beat rate may prove harder to maintain. | ||
Sell-side analysts maintain approximately 31% upside to the current price near $136.79, with a price target near $156.34, reflecting confidence in the company's market position in drainage systems and stormwater management infrastructure. Sentiment breakdown | The stock price approaches within 10% of the analyst target over the next 12 months as the recovery in infrastructure spending is reflected in results. | →Stable |
| CounterWith 10 analysts covering the stock and a light coverage designation, the consensus target may be less well-anchored than for larger peers, and a single target revision could shift the upside estimate materially. | ||
The company generates a 25% return on equity and a Piotroski financial health score of 7 out of 9, placing it in the upper tier of quality within the building products sector and suggesting a durable competitive position in drainage infrastructure. Quality breakdown | Return on equity remains above 20% over the next 12 months, confirming sustained capital efficiency. | →Stable |
| CounterFree cash flow is only 79% of net income, suggesting the company is consuming significant capital to generate reported earnings, which may limit reinvestment flexibility. | ||
Stormwater products account for approximately 78.6% of total revenues, creating significant concentration risk where any slowdown in municipal infrastructure spending or construction activity would disproportionately impact total company results. Bear case | Stormwater segment revenue grows at least 5% annually over 12 months, maintaining demand supported by infrastructure investment programs. | →Stable |
| CounterHigh concentration in a single infrastructure category also means the company benefits disproportionately from any federal or state infrastructure spending increase directed at water management. | ||
Advanced Drainage Systems has beaten analyst earnings estimates in all four of its most recent quarters with an average positive surprise of approximately 14%, indicating consistently strong operational execution above Street forecasts.
→StableEarnings
- Expectation
- The company continues to beat earnings estimates in at least 3 of the next 4 quarters, maintaining the positive surprise rate above 10%.
CounterThe earnings beat streak coincides with analyst estimates that may have been set conservatively following a period of industry destocking; as estimates normalize higher, the beat rate may prove harder to maintain.
Sell-side analysts maintain approximately 31% upside to the current price near $136.79, with a price target near $156.34, reflecting confidence in the company's market position in drainage systems and stormwater management infrastructure.
→StableSentiment breakdown
- Expectation
- The stock price approaches within 10% of the analyst target over the next 12 months as the recovery in infrastructure spending is reflected in results.
CounterWith 10 analysts covering the stock and a light coverage designation, the consensus target may be less well-anchored than for larger peers, and a single target revision could shift the upside estimate materially.
The company generates a 25% return on equity and a Piotroski financial health score of 7 out of 9, placing it in the upper tier of quality within the building products sector and suggesting a durable competitive position in drainage infrastructure.
→StableQuality breakdown
- Expectation
- Return on equity remains above 20% over the next 12 months, confirming sustained capital efficiency.
CounterFree cash flow is only 79% of net income, suggesting the company is consuming significant capital to generate reported earnings, which may limit reinvestment flexibility.
Stormwater products account for approximately 78.6% of total revenues, creating significant concentration risk where any slowdown in municipal infrastructure spending or construction activity would disproportionately impact total company results.
→StableBear case
- Expectation
- Stormwater segment revenue grows at least 5% annually over 12 months, maintaining demand supported by infrastructure investment programs.
CounterHigh concentration in a single infrastructure category also means the company benefits disproportionately from any federal or state infrastructure spending increase directed at water management.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Advanced Drainage Systems has delivered four consecutive quarterly earnings beats with an average positive surprise of 14%, strong analyst upside of 31%, and improving momentum, though heavy concentration in stormwater products and a below-200-day-average price create near-term caution for new position additions.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 8.4 |
| ROA | 7.0 |
| Gross margin | 3.7 |
| Op margin | 6.2 |
| Net margin | 7.0 |
| Current ratio | 8.2 |
| FCF quality | 5.9 |
| Moat | 6.1 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 25%
- ▸Earnings quality warning: 79% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
2.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.0 |
| EPS growth | 0.0 |
Momentum
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 9.0 |
| Volume | 0.0 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 8.2 |
| Price target | 7.6 |
| erm sentiment | 6.3 |
- ▸Light analyst coverage (10.0) — signal dampened
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
4.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.0 |
| quality rank | 7.6 |
| growth rank | 7.3 |
Technical
3.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.4 |
| support resistance | 2.0 |
| 52w position | 7.0 |
Risk (lower is worse)
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.7 |
| days to cover | 7.9 |
| volatility | 2.6 |
| put call | 7.9 |
| implied vol | 4.0 |
| beta | 6.0 |
| debt equity | 5.1 |
- ▸Concentration risks: 1 HIGH, 1 MED (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
7.6/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 6.5 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 9.7 |
| dividend safety | 7.0 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 53.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position. | News modifier +1 (SELL_IF_HOLDING → HOLD_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_SELL|L3:NEWS_MOD=+1Passed (7)
- MOMENTUM:5.0>=4.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:34d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.2<1.5@spot
Warning (1)
- MOMENTUM:5.0<5.5 (soft — BUY_NOW allowed but watch)
Reward-to-Risk
0.24
Upside
+3.6%
Downside
15.0%
Sizing output
AVOID
SetupMomentum Cont — Trend continuation, RSI 66, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.3 below the 5.4 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Catalyst at 7.6) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.2<1.5@spot) reinforce the read. Current asymmetry R:R is 0.24 — supplementary context, not the trigger for this path.
The strongest dimensions are Catalyst at 7.6, Sentiment at 7.5, and Quality at 6.7; the weakest are Growth at 2.5, Technical at 3.8, and Peer rank at 4.7. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 0.24 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Perfect Earnings Beat Streak
Trip ifEPS surprise falls below 0% in at least 2 of the next 4 quarters, breaking the four-quarter beat streak.
- P2Analyst Upside Target
Trip ifAnalyst price target falls below $140, reducing upside to less than 5% from the current price near $136.79.
- P3High Quality Business Metrics
Trip ifReturn on equity drops below 18% in any reported fiscal year, signaling the quality profile is deteriorating.
- P4Stormwater Concentration Risk
Trip ifStormwater segment revenue declines by more than 10% year-over-year in any reported quarter.