Muchas gracias @dblanco, tiene buena pinta aunque se escapa completamente de mi circulo de competencia.
Si no te importa y para ampliar el analisis, copio lo que Morningstar dice:
Economic Moat: Wide (trend stable)
Fair value: 187
5 Stars price: under 130,90
Waters Has Underperformed Expectations Recently but Long-Term Prospects Remain Attractive
Business Strategy and Outlook | by Alex Morozov Updated Nov 13, 2018
Waters’ leadership in the liquid chromatography and mass spectrometry market gives it a compelling inherent competitive edge–the company’s large installed base of instruments generates high consumables utilization and benefits from a sticky base of sophisticated biopharma customers. In relative terms, Waters enjoys a greater portion of sales from high margin consumables and higher exposure to the biopharma market than close peers, such as Agilent. Additionally, the greater product sophistication for liquid chromatography makes these products sell at considerably higher price points than gas chromatography counterparts.
Waters’ greater exposure to the biopharma market should also enable higher growth relative to peers. The need for LC/MS to lead biological molecule research and characterization has led to high demand for Waters’ products over the past few years, which is a trend we expect to continue although at a slower pace. We estimate the biologics customer segment has grown at a nearly low-double-digit annualized pace over the last decade and now represents about 20% of Waters’ customer base.
Waters’ growth has underperformed expectations recently, but we anticipate exposure to China and new product innovation will remain key growth drivers to Waters’ business. We believe Waters’ weakness has stemmed in part from underperformance in its thermal analysis segment, tougher year-over-year comps in its biopharma business, and likely modest market share losses to competitors, like Agilent, that have stepped up their LC-MS product offerings. Although management has mistimed the product refresh cycle, in our view, the company’s BioTOF mass spectrometer in development with launch in 2019, for instance, will cater specifically to the development and quality analysis needs of biopharma customers and should help the company regain its footing. Meanwhile, sales in China as a percentage of revenue have more than doubled over the last decade and now represents close to 17% of total sales. Despite growing concerns over tariffs affecting Chinese customer purchases, we still anticipate healthy demand for Waters’ sophisticated and high-performance products.
Economic Moat | by Alex Morozov Updated Nov 13, 2018
We believe Waters has a wide moat thanks largely to the company’s leadership in liquid chromatography and mass spectrometry. Consistent innovation creates intangibles that drive adoption of the company’s instrument platform, while high switching costs help lock in customers over long-term replacement cycles. The customer base of scientists that utilize these instruments face a steep learning curve and sizable upfront investments to utilize the specialized and highly sensitive equipment in these markets. Scientists often remain loyal to suppliers to ensure sample protection and standardization while minimizing workflow disruptions.
While consumables on LC/MS machines are largely interchangeable among competitors, customers generally stick with Waters’ own products, primary LC columns, due to the company’s high manufacturing quality, product innovation, and to avoid losing valuable data from risk of third-party products. Waters sells nearly as many of its original uBondpak LC columns now as it did in the late 1970s, but higher performance standards on new instruments often leads to higher consumables attachment rates. Waters’ launch of UltraPerformance Liquid Chromatography (UPLC) columns creates more demanding instrument and materials performance criteria by running at higher pressure than older HighPerformance (HPLC) products. Approximately 65% of Waters instrument users therefore stick with the company’s columns in UPLC, whereas substitution is higher in the HPLC category at about 20%.
Waters’ extensive exposure to the biopharma market enables its instruments and consumables to become engrained in the drug-manufacturing process. Including branded and generic small molecule drug manufacturers as well as CROs, the total biopharma customer segment composes about 60% of Waters’ revenue, which gives the company near a quarter market share in this category, by our estimate. As a researcher uses one platform in the early stage of drug development, regulation requires the same instrumentation through the drug’s lifecycle, which can last years. Any changes to manufacturing (which includes testing for impurities, etc.) would require approval from regulators. Agilent, Danaher, Bruker, Thermo Fisher, and Shimadzu are the primary competition.
Instrumentation and reagents in these markets tend to incorporate a high level of technological complexity that also keeps barriers to entry somewhat high, in our opinion. In addition to the challenges of manufacturing reliable, complex instruments, we think the necessary service components of these markets, including training, consultation, and repair, present hurdles for new entrants to establish a reputable brand.
Waters’ industry leading profitability and returns on capital reflect the company’s wide moat. Operating margin and return on invested capital have been in excess of 20% and 30% over the last decade, respectively, among the highest in the life science and diagnostics industry.
Fair Value and Profit Drivers | by Alex Morozov Updated May 06, 2019
Our fair value estimate is $187 per share. Our valuation implies a enterprise value/EBITDA of 15 and a price/adjusted earnings multiple of approximately 20 times.
Although we anticipate the recent sales progression in the biopharma market will slow over time, we still view Waters’ exposure to this higher growth market, new product launches, and exposure to China as long-term positives for the company’s trajectory. We model a stable mid-single-digit growth rate over the coming years, driven mostly by the LC-MS segment. We forecast low-single-digit growth in Waters’ thermo analysis division.
We also forecast stable profitability for Waters, with adjusted operating margin remaining roughly unchanged between 30% to 32%. We don’t anticipate any competitive issues or material shifts in product mix that will dramatically alter the company’s margins. Our assumptions result in returns on invested capital continuing to range between 30% and 35%, and we estimate the company’s cost of capital at 8.5%.
Risk and Uncertainty | by Alex Morozov Updated Nov 13, 2018
We give Waters a medium uncertainty rating thanks to the relatively high barriers to entry, moderate switching costs, and mostly stable product evolution in the chromatography instrument markets. Additionally, Waters’ pristine balance sheet affords the company plenty of flexibility. Waters’ equipment sales increases exposure to macroeconomic conditions, especially among its industrial customers, but the company’s large revenue contribution from consumables and biopharma customers makes the business somewhat more insulated from spending cycles. Waters has also reduced its reliance on Big Pharma customers. The top 10 pharma customers now account for only about 15% of sales after making up about one third of the business in 2005. While government research spending has been fairly consistent, future budget restrictions could depress spending among government and academic customers.
Waters is also a very focused business operating in a competitive environment. Despite its smaller thermal analysis segment, we consider Waters essentially a pure-play on the LC/MS market, where most of its competitors are larger diversified organizations. If established competitors or new entrants introduce better products or develop stronger relationships with customers, the company may lose market share as well as its ability to extract price increases. Moreover, the company competes with many larger rivals, and investing significant resources in its core business is required to maintain its technological edge. Regardless, Waters’ large liquid chromatography and mass spectrometry business seems largely immune to disruptive technologies, in our opinion.
Stewardship | by Alex Morozov Updated Nov 13, 2018
We maintain our Exemplary stewardship rating for Waters. We’re somewhat concerned with management’s product pipeline, as other competitors like Agilent seem to have gained share from Waters thanks to innovative products. Regardless, we think Waters’ economic moat remains strong, as evidenced by industry leading profitability and returns on capital. We also think management’s disciplined capital allocation strategy has preserved high returns on capital.
Waters has had some executive turnover during the last few years, but we don’t envision any major strategic shift for the business. Chris O’Connell, who is the former president of the restorative therapies group at Medtronic, replaced Douglas Berthiaume as CEO in 2015. O’Connell also replaced Berthiaume as chairman of the board in 2018. Sherry Buck became CFO in 2017 and has previous financial executive experience at Libbey and Whirlpool. O’Connell inherits a business with profitability and returns on capital at nearly the highest in the industry, and we anticipate the company will still follow a disciplined capital allocation strategy. So far, management has followed similar footsteps of its predecessors focusing on internal product development efforts and returning capital to shareholders through share repurchases.
We think Waters’ executive team is fairly aligned with shareholder interests. Insider ownership is not particularly large, but total compensation is heavily weighted toward long-term incentives based on relative total shareholder return. Short-term incentives are based on revenue and adjusted earnings growth.