The firm said it changed its rating for the company, which supplies products for use in the water safety, water quality, water flow control and water conservation markets, based on a valuation call and a recent pullback in shares.
Sterne Agee raised its price target on the stock to $68 from $60.
Shares of Watts Water Technology are down -1.7% to $52.76 this morning.
Separately, TheStreet Ratings team rates WATTS WATER TECHNOLOGIES INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate WATTS WATER TECHNOLOGIES INC (WTS) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- WTS's revenue growth has slightly outpaced the industry average of 4.8%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The current debt-to-equity ratio, 0.31, is low and is below the industry average, implying that there has been successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.46, which illustrates the ability to avoid short-term cash problems.
- 36.50% is the gross profit margin for WATTS WATER TECHNOLOGIES INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 3.86% trails the industry average.
- WATTS WATER TECHNOLOGIES INC's earnings per share declined by 13.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, WATTS WATER TECHNOLOGIES INC reported lower earnings of $1.71 versus $1.96 in the prior year. This year, the market expects an improvement in earnings ($2.70 versus $1.71).
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: WTS Ratings Report
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