Is Waters Corp. overvalued or undervalued?

As of 2 August 2023, Waters Corp. has seen its valuation grade change from attractive to fair, indicating a shift in market perception. The company is currently fairly valued, with a P/E ratio of 85, a Price to Book Value of 28.71, and an EV to EBITDA ratio of 54.96. In comparison to its peers, ResMed, Inc. has a more attractive P/E ratio of 36.04, while Agilent Technologies, Inc. maintains a fair valuation with a P/E of 25.22.
Despite the fair valuation, Waters Corp. has shown strong performance metrics, including a ROCE of 27.82% and an ROE of 33.82%. However, its recent stock performance has lagged behind the S&P 500, with a year-to-date return of -7.59% compared to the index's 2.44%. This underperformance, coupled with high valuation ratios, suggests that while the company is currently fairly valued, it may face challenges in justifying its premium pricing in the near term.