A Closer Look at Advanced Drainage Systems (WMS) Valuation Following Recent Share Price Momentum

Advanced Drainage Systems (WMS) has delivered a 9% return over the past month, signaling steady performance for investors tracking the construction and water management sector. The company’s annual revenue growth and expanding profitability are drawing increased attention.

See our latest analysis for Advanced Drainage Systems.

Advanced Drainage Systems’ 1-month share price return of 9% builds on solid yearly momentum, and its 13% total return over the last year hints at underlying confidence among investors. While not headline-grabbing, the steady uptick suggests optimism is on the rise and the company’s fundamentals are supporting this trend.

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Given this track record and with shares currently trading at a 12% discount to most analyst price targets, the big question is whether Advanced Drainage Systems remains undervalued, or if anticipated growth is already reflected in today’s price.

Most Popular Narrative: 11.3% Undervalued

With the most widely referenced narrative assigning a fair value of $171.78, Advanced Drainage Systems' last close at $152.38 suggests notable upside remains on the table. This stage is set by strong revenue growth, margin expansion, and increased investor focus on the company’s forward potential.

Ongoing climate change and increasing frequency/severity of extreme weather events are driving up the necessity for advanced stormwater management and resilient drainage infrastructure, underpinning structural, long-term volume growth, supporting sustained revenue acceleration.

Read the complete narrative.

What does this narrative really hinge on? There are bold earnings and revenue growth forecasts just beneath the surface. The margin trajectory stands out within its peer group, and future valuation multiples projected here would attract attention across the market. It all adds up to an ambitious price target with assumptions you’ll want to uncover.

Result: Fair Value of $171.78 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain, including weaker end-market demand or input cost inflation, which could pressure both future margins and the bullish outlook if trends reverse.

Find out about the key risks to this Advanced Drainage Systems narrative.

Another View: SWS DCF Model Signals A Different Story

Looking through the perspective of the SWS DCF model, the valuation picture is different. The model calculates a current fair value for Advanced Drainage Systems below today’s market price, suggesting the stock may be overvalued. This prompts questions about the underlying growth expectations and the sources of investor optimism.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Advanced Drainage Systems for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 920 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Advanced Drainage Systems Narrative

If you'd rather trust your own analysis than rely solely on these viewpoints, you can dive into the fundamentals and shape your own story in just a few minutes. Do it your way.

A great starting point for your Advanced Drainage Systems research is our analysis highlighting 1 key reward and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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