Advanced Drainage Systems, Inc. (NYSE: WMS)

Sector: Industrials Industry: Building Products & Equipment CIK: 0001604028
Market Cap 13.26 Bn
P/B 6.88
P/E 28.18
P/S 4.44
ROIC (Qtr) 15.53
Div Yield % 0.41
Rev 1y % (Qtr) 0.41
Total Debt (Qtr) 1.45 Bn
Debt/Equity (Qtr) 0.75
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About

Advanced Drainage Systems, Inc. (ADS), a prominent name in the water management solutions industry, operates within the stormwater and onsite septic wastewater sectors. With its headquarters in Wilkesboro, North Carolina, ADS boasts a global presence, including manufacturing facilities in the United States, Canada, Mexico, and other countries. The company's primary business activities revolve around providing superior drainage solutions for construction and agriculture marketplaces. ADS has established a leading position in many of these end markets,...

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Investment thesis

Bull case

  • Strong operating cash flow of 820.36M provides robust 0.57x coverage of total debt 1.45B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 1.01B provide 23.38x coverage of short-term debt 43.12M, demonstrating strong liquidity position and minimal refinancing risk.
  • Operating cash flow of 820.36M provides exceptional 1182.07x coverage of minority interest expenses 694000, showing strong core operations.
  • Operating cash flow of 820.36M provides strong 26.78x coverage of stock compensation 30.64M, indicating sustainable incentive practices.
  • Robust free cash flow of 609.34M exceeds capital expenditure of 211.02M by 2.89x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 820.36M barely covers its investment activities of (231.55M), with a coverage ratio of -3.54, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 820.36M provides thin coverage of dividend payments of (54.51M) with a -15.05 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 1.01B provide limited coverage of acquisition spending of (18.56M), which is -54.33x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 609.34M represents just -27.31x of debt issuance (22.32M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 1.84B provide limited buffer against comprehensive income items of (30.20M), which is -61.07x, indicating elevated exposure to market risks.

Consolidation Items Breakdown of Revenue (2025)

Geographical Breakdown of Revenue (2025)

Peer comparison

Companies in the Building Products & Equipment
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 TT Trane Technologies plc 104.89 Bn 35.94 4.92 4.62 Bn
2 JCI Johnson Controls International plc 91.64 Bn 26.98 3.82 9.71 Bn
3 CARR CARRIER GLOBAL Corp 56.66 Bn 38.18 2.61 12.25 Bn
4 LII Lennox International Inc 19.91 Bn 24.71 3.83 1.77 Bn
5 CSL Carlisle Companies Inc 17.50 Bn 23.63 3.49 2.88 Bn
6 MAS Masco Corp /De/ 15.94 Bn 19.68 2.11 3.17 Bn
7 OC Owens Corning 13.83 Bn 13.90 1.63 5.61 Bn
8 WMS Advanced Drainage Systems, Inc. 13.26 Bn 28.18 4.44 1.45 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.35 2.00
EV to Cash from Ops. EV/CFO 16.92 13.48
EV to Debt EV to Debt 9.60 10.94
EV to EBIT EV/EBIT 19.42 24.16
EV to EBITDA EV/EBITDA 15.62 -11.14
EV to Free Cash Flow [EV/FCF] EV/FCF 22.78 46.78
EV to Market Cap EV to Market Cap 1.05 1.12
EV to Revenue EV/Rev 4.64 2.81
Price to Book Value [P/B] P/B 6.88 4.24
Price to Earnings [P/E] P/E 28.18 47.40
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 8.64 0.80
Dividend Payout Ratio % Div Payout % (Qtr) 11.60 11.22
Dividend per Basic Share Div per Share (Qtr) 0.70 0.71
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 8.94 10.90
Interest Coverage Int. cover (Qtr) 7.82 111.58
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 0.93 -24.93
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 106.23 61.26
Dividend Growth (1y) % Div 1y % (Qtr) 12.90 1.67
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 0.31 -186.82
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 4.28 -57.93
EBIT Growth (1y) % EBIT 1y % (Qtr) 1.56 -102.26
EBT Growth (1y) % EBT 1y % (Qtr) 1.87 -299.15
EPS Growth (1y) % EPS 1y % (Qtr) 0.33 -598.34
FCF Growth (1y) % FCF 1y % (Qtr) 76.66 89.70
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 3.22 -3.62
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.72 0.88
Cash Payout Ratio Cash Payout (Qtr) 0.05 0.13
Cash Ratio Cash Ratio (Qtr) 2.44 1.57
Current Ratio Curr Ratio (Qtr) 4.13 3.42
Debt to Equity Ratio Debt/Equity (Qtr) 0.75 0.79
Interest Cover Ratio Int Coverage (Qtr) 7.82 111.58
Times Interest Earned Times Interest Earned (Qtr) 7.82 111.58
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 30.80 3.54
EBIT Margin % EBIT Margin % (Qtr) 23.92 1.23
EBT Margin % EBT Margin % (Qtr) 20.86 -1.76
Gross Margin % Gross Margin % (Qtr) 38.70 28.65
Net Profit Margin % Net Margin % (Qtr) 15.70 -3.80