Is It Too Late To Consider Watts After Its Big 2025 Share Price Run?

• If you are wondering whether Watts Water Technologies is still a smart consideration after its big run, or if you are late to the party, you are in the right place to unpack what the market is really pricing in.
• The stock has climbed 37.1% year to date and 28.6% over the last year, with an 84.6% gain over three years and 143.8% over five years, even though it has been roughly flat over the last month and slightly down 1.0% over the past week.
• Recent attention has centered on Watts as a picks and shovels player in water infrastructure and efficiency solutions, as investors look for durable businesses tied to long term trends such as conservation and building upgrades. That narrative has helped support the share price even as broader industrial names have seen more mixed sentiment.
• Despite that strength, Watts only scores a 2/6 valuation check, suggesting the market may be pricing in a lot of optimism. We will break down what different valuation approaches say about that, and at the end we will look at a more holistic way to think about value that goes beyond simple multiples and models.

Watts Water Technologies scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Watts Water Technologies Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a business is worth today by projecting its future cash flows and then discounting those back into current dollars. For Watts Water Technologies, the model starts with last twelve months Free Cash Flow of about $349.7 million and uses analyst forecasts for the next few years, then extrapolates further out using Simply Wall St assumptions.

Under this 2 Stage Free Cash Flow to Equity approach, Free Cash Flow is projected to rise to roughly $667.2 million by 2035, with interim estimates such as $380.2 million in 2026 and $502.3 million in 2029, all in dollars. These projected cash flows are discounted back to today to arrive at an estimated intrinsic value of about $285.13 per share.

Compared with the current share price, this implies the stock is trading at roughly a 3.6% discount to its DCF value. This suggests that, while not a screaming bargain, Watts appears modestly undervalued based on cash flow alone.

Result: ABOUT RIGHT

Watts Water Technologies is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Watts Water Technologies.

Approach 2: Watts Water Technologies Price vs Earnings

For a consistently profitable business like Watts Water Technologies, the price to earnings, or PE, ratio is a practical way to gauge what investors are paying for each dollar of current earnings. In general, higher expected growth and lower perceived risk justify a higher PE, while slower growth or elevated risk should pull a normal or fair PE down.

Watts currently trades on a PE of about 28.2x, above the Machinery industry average of roughly 25.3x but below the broader peer group average of around 31.8x. To move beyond simple comparisons, Simply Wall St calculates a proprietary Fair Ratio, which estimates what PE a company should command given its earnings growth profile, profitability, industry, market cap and specific risks. This makes it more tailored than a blunt peer or sector average, which can be skewed by outliers or businesses with very different fundamentals.

For Watts, the Fair Ratio is estimated at about 22.7x. This means the market is paying a noticeably higher multiple than this fundamentals based benchmark. That gap suggests the shares look somewhat expensive on earnings.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Watts Water Technologies Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework where you describe the story you believe about Watts Water Technologies, connect that story to a specific forecast for revenue, earnings and margins, and then see what fair value that implies. On Simply Wall St's Community page, used by millions of investors, Narratives give you an accessible way to turn your view of the business into numbers, compare the resulting Fair Value to today’s Price, and decide whether Watts looks like a buy, hold or sell. Because these Narratives update dynamically when new news, guidance or earnings arrive, they stay in sync with the latest information instead of becoming stale. For Watts, one Narrative might assume stronger growth in smart water management, higher margins and a Fair Value around $300, while a more cautious Narrative could assume slower adoption, tighter margins and a Fair Value closer to $250. Seeing where your own expectations sit between those bookends helps you decide what the current share price really means for you.

Do you think there's more to the story for Watts Water Technologies? Head over to our Community to see what others are saying!

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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