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Bull of the Day: Watts Water Technologies, Inc. (WTS)

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Key Takeaways

  • Watts Water Technologies crushed the S&P 500 and Tech over the past five and 25 years.
  • WTS benefits from infrastructure spending and AI because data centers use huge amounts of water.
  • WTS stock pays a dividend and trades at a big discount to its highs on the valuation front.

Watts Water Technologies, Inc. ((WTS - Free Report) runs an essential but boring business across plumbing, heating, sustainability, and quality. Yet, its returns and earnings growth are far from ordinary.

Watts Water stock has skyrocketed 2,400% in the past 25 years to blow away the S&P 500’s 420%, including a 170% run over the past five years, topping the benchmark’s 100% and the Zacks Tech sector’s 130%.

Its recent upward earnings revisions activity earn WTS a Zacks Rank #1 (Strong Buy), and it’s topped our quarterly estimates for five years running.

Water is one of the most precious resources on the planet. Watts Water’s innovations across the space make it a behind-the-scenes economic pillar.

The non-flashy, dividend-paying company’s offerings will remain critical no matter what the economy looks like 10 or 20 years from now. Investors looking for stability and proven growth should consider Watts Water.

On top of all that, Watts Water is benefiting from the broader reshoring and infrastructure spending boom. WTS is also a somewhat under-the-radar artificial intelligence play since AI data centers use enormous amounts of water for cooling servers.

Buy Top-Ranked WTS Stock and Hold Forever

Watts Water is a leading manufacturer of plumbing, heating, and water quality products and solutions that help manage and conserve water and energy in homes, offices, and beyond.

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Digging a bit deeper, its plumbing and flow-control products help facilitate efficient water transportation and control for commercial, residential, and industrial applications. Watts Water offers an array of drainage solutions and irrigation systems, as well as radiant heating and cooling offerings, fire protection, and beyond.  

Watts Water operates a growing water quality and filtration segment, as well as innovative rainwater harvesting solutions. Its commercial rainwater harvesting systems are designed to capture, store, treat, and deliver non-potable water for a variety of end uses, including irrigation, restrooms, and more.

WTS: Outlook and Growing Connection to AI Data Centers

Water is one of the most vital resources on the planet. Watts Water’s business revolves around making sure water usage is optimized at every turn. Watts Water is launching more connected smart products that are gaining traction as it benefits from the growing efficiency push across residential and commercial construction.

The company is riding multiple key long-term trends, from reshoring to broader infrastructure spending.

Watts Water is also gaining traction in the AI arms race because of the massive amounts of water needed to help cool and operate AI data centers. AI’s demand for water globally in 2027 could account for half of the total annual amount withdrawn for use in the U.K., according to the Wall Street Journal.

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WTS notes that its next-gen water management technologies help “protect against water-based hardware damage" at data centers, reduce an AI facility’s water consumption, and decrease operational costs.

The water company posted a beat-and-raise Q2 report in early August. Watts Water is projected to grow its revenue by 4% in 2025 and 2026 to reach $2.44 billion, adding roughly $1 billion to its top-line since 2020.

It is projected to grow its adjusted earnings per share (EPS) by 11% in 2025 and 8% next year after more than doubling its EPS between 2020 and 2024. 

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Watts Water has beaten our bottom-line estimates for five years in a row, and its earnings revisions have surged recently after a stretch of sideways movement in 2024.

Its most accurate EPS estimates also came in above consensus. Watts Water's overall EPS revisions earn it a Zacks Rank #1 (Strong Buy).

Watts Water’s Performance, Valuation, and Other Reasons to Buy

WTS is benefiting from aggressive cost reduction actions along with a strong balance sheet. It’s focused on enhancing organic growth, driving margin expansion, and reinvesting in productivity initiatives.

The company pays a quarterly dividend of $0.52 a share, up from $0.43 in FY24 and $0.23 per share in FY20.

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Watts Water stock climbed 170% in the past five years vs. Tech’s 130% and the S&P 500’s 100%. This run includes a 37% charge in 2025 that has it trading right near its all-time highs alongside the broader market.

As we touched on up top, WTS stock has climbed 2,400% in the past 25 years to blow away the S&P 500’s 420%. Better yet, its total return, which factors in the reinvestment of dividends and any other distributions to purchase more shares, soars to 3,250%.

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Despite trading right near its all-time highs in terms of price, Watts Water trades at a 20% discount to its peaks at 26.7X forward 12-month earnings.

The stock broke out meaningfully above its 2021 highs in May after meeting resistance there for most of 2024. Watts Water is attempting to hold its ground at its 21-day moving average, and it trades at neutral RSI levels.

Some investors might want to wait for WTS to cool off a bit before they buy. But the same could be said for the entire market, and the market-timing game is a risky one to play for long-term investors. 


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