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Advanced Drainage Systems, Inc. (WMS) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Advanced Drainage Systems, Inc. (WMS)

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Intrinsic Value (DCF)

Current$159.28
→
Intrinsic$137.94
-13%
$89.95$137.94$229.03
Market implies 26% growth for 5 years
WMS appears fairly valued — current price aligns with our DCF estimate.
At $159, the market prices in continued strong cash flow growth (26%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $90 → Bull $229. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →18%20%22%24%
8%$172$187$203$220
10%$117$127$138$150
12%$86$94$102$111
14%$67$73$79$86

Bull Case

  • Bull case ($229) offers 44% upside at 27% growth, 9% discount

Bear Case

  • Bear case ($90) implies 44% downside at 18% growth, 12% discount
  • Using 22% growth — aggressive, watch for mean reversion
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5-Year Free Cash Flow Projection

Year 1$450.68M
Year 2$551.10M
Year 3$673.91M
Year 4$824.09M
Year 5$1.01B
Terminal$14.83B

📐 Model Inputs

Growth Rate22.3%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$368.55MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is WMS stock undervalued or overvalued?
🔴 OVERVALUED

WMS trades at $159.28 vs. our DCF-derived intrinsic value of $125.43, implying -16% downside. Using a 10.0% WACC and 22.3% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($195.36) suggests limited upside.

What is WMS's intrinsic value?

Using a 5-year DCF model: Base FCF of $369M, projected at 22.3% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $982M net debt and dividing by 0.08B shares: Bear $77.95 | Base $125.43 | Bull $195.36. Current price $159.28 implies -16% to base case.

How is WMS's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 22.3% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($10.79B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.