Watts Water Technologies (NYSE:WTS) has had more than its share of management turnover in the past 15 or so years and the company's returns on capital have long been less than you'd expect from a company with market-leading products, but current management can't be faulted for sitting on their hands. Not only has the company undergone a fairly meaningful product portfolio restructuring, management has also set out to streamline its distribution and manufacturing footprint, while also seeking out cross-selling opportunities and international growth, and pursuing reinvestment in product development.
Margins have been picking up (on a non-GAAP basis), but organic growth hasn't been so impressive. What's more, the company's core markets aren't looking tremendously dynamic. I accept that companies in the water technology space often get a premium valuation, but paying a double-digit multiple on 12-month EBITDA for a company that is likely to generate high single-digit EBITDA growth isn't so appealing to me right now.
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Watts Water Pursuing Multiple Avenues Of Self-Improvement