Value
3.5/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 3.8 |
| P/S | 7.0 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 4.4 |
| PEG | 3.0 |
| Analyst target | 3.0 |
- ▸Forward P/E: 28.0x
- ▸PEG: 4.15
WTS · Why this verdict
Why Watts Water Technologies (WTS) is rated BUY WAIT
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
Show full disclosure ▾Hide full disclosure ▴
About TrendMatrix. TrendMatrix is a publisher of general securities research and market commentary. We publish on a regular schedule. All content is the same for every subscriber in a tier — we do not provide personalized investment advice and we do not take into account any individual subscriber's financial situation, investment objectives, risk tolerance, tax situation, or holdings.
Not investment advice. TrendMatrix is not a registered investment adviser. Our content is for informational and educational purposes only. Consult your own licensed investment adviser, broker, or tax professional before making any investment decision.
Conflicts and positions. The TrendMatrix editorial team frequently holds personal long-term positions in securities discussed. We disclose positions held at the time of publication on each piece. We maintain a trading-window policy: we do not initiate or close positions in the same direction as a TrendMatrix publication within 24 hours before or 72 hours after publication.
No paid promotion. TrendMatrix does not accept payment from any issuer, broker, or third party in exchange for coverage of any security. Our sole compensation is subscription revenue.
No fiduciary duty. No fiduciary, advisory, or agency relationship is created between you and TrendMatrix by reading our content or subscribing to our service.
Performance. Past performance is not indicative of future results. Performance figures reflect the published model only and do not reflect any individual subscriber's actual results.
VerdictBUY WAIT
Overall score5.9/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Watts Water has been identified as having a wide economic moat with compounder quality — strong returns combined with growth — and a Piotroski F-Score of 8 out of 9, placing it among the highest-quality businesses in the industrial machinery sector. Quality breakdown | Piotroski F-Score remains at 7 or above and operating margins stay above current levels over the next 12 months. | →Stable |
| CounterMoat ratings in industrial components can erode as competitors develop alternative flow control solutions or international manufacturers undercut on price in less specialized product lines. | ||
Watts Water has beaten earnings estimates in each of the last four quarters with an average surprise of 13.3%, most recently delivering a 13.0% beat and a 17.7% beat in the two most recent quarters. Earnings | The beat streak continues for at least 3 of the next 4 quarters with average surprise remaining above 8%. | →Stable |
| CounterFour consecutive beats at double-digit rates typically result in consensus estimate resets that make subsequent beats much harder to achieve. | ||
Revenue growth of 21% year-over-year and earnings growth of 21% place Watts Water among the industry leaders in the specialty industrial machinery sector by growth rate. Growth breakdown | Revenue growth remains above 10% annually and earnings growth stays above 12% over the next 12 months. | →Stable |
| CounterFlow control product demand is tied to construction and renovation cycles that are peaking in many markets, making current 21% growth rates unlikely to sustain through a cyclical correction. | ||
Free cash flow represents only 50% of net income, flagged as an earnings quality warning — meaning a significant portion of reported earnings is not converting to cash, creating a gap between reported profitability and financial reality. Quality breakdown | Free cash flow conversion improves to at least 70% of net income within the next 12 months as working capital management improves. | →Stable |
| CounterA 50% free cash flow conversion in a growth industrial business is common when capital expenditure for expansion is high; this may normalize once the growth investment cycle peaks. | ||
Watts Water has been identified as having a wide economic moat with compounder quality — strong returns combined with growth — and a Piotroski F-Score of 8 out of 9, placing it among the highest-quality businesses in the industrial machinery sector.
→StableQuality breakdown
- Expectation
- Piotroski F-Score remains at 7 or above and operating margins stay above current levels over the next 12 months.
CounterMoat ratings in industrial components can erode as competitors develop alternative flow control solutions or international manufacturers undercut on price in less specialized product lines.
Watts Water has beaten earnings estimates in each of the last four quarters with an average surprise of 13.3%, most recently delivering a 13.0% beat and a 17.7% beat in the two most recent quarters.
→StableEarnings
- Expectation
- The beat streak continues for at least 3 of the next 4 quarters with average surprise remaining above 8%.
CounterFour consecutive beats at double-digit rates typically result in consensus estimate resets that make subsequent beats much harder to achieve.
Revenue growth of 21% year-over-year and earnings growth of 21% place Watts Water among the industry leaders in the specialty industrial machinery sector by growth rate.
→StableGrowth breakdown
- Expectation
- Revenue growth remains above 10% annually and earnings growth stays above 12% over the next 12 months.
CounterFlow control product demand is tied to construction and renovation cycles that are peaking in many markets, making current 21% growth rates unlikely to sustain through a cyclical correction.
Free cash flow represents only 50% of net income, flagged as an earnings quality warning — meaning a significant portion of reported earnings is not converting to cash, creating a gap between reported profitability and financial reality.
→StableQuality breakdown
- Expectation
- Free cash flow conversion improves to at least 70% of net income within the next 12 months as working capital management improves.
CounterA 50% free cash flow conversion in a growth industrial business is common when capital expenditure for expansion is high; this may normalize once the growth investment cycle peaks.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Watts Water Technologies is a high-quality industrial machinery manufacturer with a perfect four-quarter earnings beat streak averaging 13.3% above estimates, 21% year-over-year earnings growth, a wide economic moat, and an 8/9 Piotroski score — but trades at a forward price-to-earnings of 25.6x with free cash flow quality at only 50% of net income, limiting the near-term return profile.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 6.3 |
| ROA | 7.7 |
| Gross margin | 5.8 |
| Op margin | 7.9 |
| Net margin | 7.2 |
| Current ratio | 9.2 |
| FCF quality | 4.0 |
| Moat | 7.6 |
| Piotroski F | 8.9 |
- ▸Earnings quality warning: 50% FCF/NI
- ▸Wide economic moat
- ▸Compounder quality: strong returns + growth
- ▸Strong Piotroski F-Score: 8/9
Growth
8.3/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 7.8 |
| EPS growth | 8.9 |
- ▸Strong growth: 21% YoY
Momentum
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 9.0 |
| Volume | 1.4 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 7.8 |
| Analyst rating | 5.0 |
| Price target | 4.1 |
- ▸LLM news sentiment: +0.57 (n=10)
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Insider selling (low materiality) — $802,590 (0.007% of mkt cap)
Peer rank
4.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.0 |
| quality rank | 7.6 |
| growth rank | 7.8 |
- ▸Best-in-class margins
Technical
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.3 |
| support resistance | 3.1 |
| 52w position | 8.7 |
Risk (lower is worse)
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.3 |
| days to cover | 6.2 |
| volatility | 3.0 |
| put call | 9.3 |
| implied vol | 7.1 |
| beta | 6.5 |
| debt equity | 9.4 |
- ▸Concentration risks: 2 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 9.2 |
| dividend safety | 5.2 |
| news activity | 8.0 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 59.0%
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more. | News modifier +2 (HOLD_IF_HOLDING → STRONG_BUY_WAIT).
Engine technical detail
verdict_path:
L4:PATH_F_HOLD|L3:NEWS_MOD=+2|ENTRY_STICKY:WITHIN_BANDPassed (6)
- MOMENTUM:5.3>=4.5
- INSIDER:OK
- 8K:CLEAN
- EARNINGS_PROXIMITY:33d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-1.2=NEGATIVE
Warning (1)
- MOMENTUM:5.3<5.5 (soft — BUY_NOW allowed but watch)
Reward-to-Risk
-1.23
Upside
-18.5%
Downside
15.0%
Sizing output
STARTER
SetupBreakout — Golden cross, above all MAs, RSI 66, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: MOMENTUM:5.3>=4.5. Top dim: Growth at 8.3; weakest: Value at 3.5. No conviction either direction.
The strongest dimensions are Growth at 8.3, Quality at 7.2, and Catalyst at 7.1; the weakest are Value at 3.5, Technical at 4.7, and Peer rank at 4.9. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -1.23 and an engine sizing output of STARTER.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Wide Moat Compounder Quality
Trip ifPiotroski F-Score falls below 6, declining more than 2 points from the current 8 out of 9.
- P2Perfect Earnings Beat Streak
Trip ifAverage earnings surprise falls below 0% in at least 2 of the next 4 reported quarters.
- P3Strong Growth Leadership
Trip ifRevenue growth falls below 8% year-over-year, declining more than 13 percentage points from the current 21%.
- P4Fcf Quality Gap
Trip ifFree cash flow conversion falls below 30% of net income, declining more than 20 percentage points from the current 50%.