Zurn Elkay Water Solutions (ZWS): Gauging Value After Strong Q3 Growth, Dividend Hike, and Buyback Expansion

Zurn Elkay Water Solutions (ZWS) drew investor focus after releasing third quarter earnings that showed double-digit sales growth, wider margins, a 22% higher dividend, and a newly increased buyback plan.

See our latest analysis for Zurn Elkay Water Solutions.

With upbeat third-quarter results, a 22% dividend boost, and an expanded buyback plan, Zurn Elkay Water Solutions has captured investor interest. The stock’s share price return is up 27.5% so far this year, and its 27.8% one-year total shareholder return shows solid momentum along with significant longer-term growth.

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This impressive run begs the question: is Zurn Elkay Water Solutions still undervalued with room for more gains, or has its strong outlook already been priced in by the market? Could there be a real buying opportunity here?

Most Popular Narrative: 5.1% Undervalued

With Zurn Elkay Water Solutions last closing at $47.04, the most followed narrative sets a fair value at $49.57, suggesting the current price remains below where consensus sees justified value. This perspective examines market catalysts and relies on some ambitious yet defensible expectations for growth and margins.

The rollout and market adoption of the new Elkay Pro Filtration platform, featuring drop-in replacements, longer filter life, proprietary filters, and IoT/connectivity, positions the company to accelerate replacement cycles and sustain double-digit growth in high-margin filtration revenue. This supports higher earnings and margin expansion.

Read the complete narrative.

Curious what’s fueling that price target? The narrative centers around breakthrough new product launches, a surge in profitability, and aggressive financial forecasts that exceed industry norms. Find out which key assumptions could make all the difference for this stock’s future. Explore the full logic behind this bullish valuation.

Result: Fair Value of $49.57 (UNDERVALUED)

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

However, ongoing reliance on nonresidential construction and potential regulatory delays could challenge growth expectations. This may make Zurn Elkay’s outlook less certain than it appears.

Find out about the key risks to this Zurn Elkay Water Solutions narrative.

Another View: Price Ratios Send a Different Signal

While the consensus narrative sees Zurn Elkay as undervalued, traditional valuation ratios tell a more cautious story. The company trades at a 42.2x ratio, well above the fair ratio of 24.2x, the US Building industry average of 21.2x, and its peer average of 32.7x. This sizable gap suggests the shares are priced at a substantial premium, which could put future returns at risk if market optimism fades. Is the company’s growth potential enough to justify such a lofty multiple?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Zurn Elkay Water Solutions Narrative

If you have a different perspective or want to dive deeper into the numbers, you can shape your own narrative in just a few minutes. Do it your way

A great starting point for your Zurn Elkay Water Solutions research is our analysis highlighting 3 key rewards 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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