Raising Waters' FVE on Strong Q1 Trends and Recent Cash Flows; Shares Still Slightly Rich

Waters reported strong first-quarter operating results, and we've raised our fair value estimate by 5%, based on stronger-than-expected results in recent quarters (100 basis points of the increase) and cash flows generated since our last valuation change (400 basis points). We continue to appreciate the durability of Waters' business model, too, which is reflected in its wide moat rating. The key durability driver of its switching cost moat source—sales to biopharmaceutical firms (60% of first-quarter sales) related to client manufacturing processes—can lead to decades-long revenue streams and continues to grow at a strong clip.