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Watts Water Technologies, Inc. (WTS) Intrinsic Value

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

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Watts Water Technologies, Inc. (WTS)

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Intrinsic Value (DCF)

Current$296.80
→
Intrinsic$266.04
-10%
$183.19$266.04$423.40
Market implies 21% growth for 5 years
WTS appears fairly valued — current price aligns with our DCF estimate.
At $297, the market prices in continued strong cash flow growth (21%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $183 → Bull $423. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →14%16%18%20%
8%$321$348$377$407
10%$228$246$266$287
12%$176$190$205$220
14%$144$154$166$178

Bull Case

  • Bull case ($423) offers 43% upside at 21% growth, 9% discount

Bear Case

  • Bear case ($183) implies 38% downside at 14% growth, 12% discount
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5-Year Free Cash Flow Projection

Year 1$383.41M
Year 2$451.21M
Year 3$530.99M
Year 4$624.88M
Year 5$735.38M
Terminal$10.82B

📐 Model Inputs

Growth Rate17.7%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$325.80MTTM 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 WTS stock undervalued or overvalued?
🟡 FAIRLY VALUED

WTS trades at $296.80, within 10% of our $266.04 intrinsic value estimate. At 10.0% WACC and 17.7% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $179.54 (bear) to $391.33 (bull).

What is WTS's intrinsic value?

Using a 5-year DCF model: Base FCF of $326M, projected at 17.7% 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 $-190M net debt and dividing by 0.03B shares: Bear $179.54 | Base $266.04 | Bull $391.33. Current price $296.80 implies -6% to base case.

How is WTS's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 17.7% 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 ($8.72B).

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: 26.8x.