Friday, December 27, 2013

The Motley Fool: Waters Corporation: Picks And Shovels Don't Always Sell Cheap

Life science tools companies like Waters Corporation (NYSE: WAT  ) , Thermo Fisher Scientific (NYSE: TMO  ) , Agilent (NYSE: A  ) , and Danaher (NYSE: DHR  ) are often described as "picks and shovels" plays on pharmaceuticals, biotech, and specialty chemicals, as these companies sell to a wide range of companies in those industries and have far less of the development risk or regulatory burden. True as that may be, these companies don't often trade cheaply and Waters is no exception.

Even though the Street has grown concerned about Waters' organic growth, these shares continue to trade at a double-digit EV/EBITDA multiple, a 50% premium to the company's expected growth over the next few years. Waters should see improving demand from the pharmaceutical space as clients work through R&D restructuring programs and Waters is well-positioned in emerging markets. There is also the possibility that a change in management (the company is searching for a new CEO) could bring with it a new approach to acquisitions. Even with that, though, it would seem that investors are not likely to see double-digit appreciation from today's price level.

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Waters Corporation: Picks And Shovels Don't Always Sell Cheap

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