Evoqua Water Technologies: Growth Does Not Justify Valuation, Yet

About: Evoqua Water Technologies Corp. (AQUA)
by: Pinxter Analytics
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Pinxter Analytics
Long/short equity, Growth, contrarian, research analyst

Evoqua's operations have been enjoying a high market share through its leading industrial, municipal and products segments in a market expected to grow 5.9% through 2025.

As industrial water and wastewater treatment demand is on the rise with regulatory pressures over the past few years, the company's industrial segment has shown significant growth.

However, as the company faces tough competition in its other segments, it expects lower sales growth rates moving forward amid declining sales and profits in their municipal and products segments.

Looking beyond its 2018 net income expectation, I believe the company, currently trading at 39x 2018 EPS estimates, is slightly overvalued for its growth.

I remain on the sidelines waiting for new revenue streams to emerge through 2018 as it continues to cut costs and expand gross margins, driving net income growth.

Business Model

Evoqua Water Technologies (NASDAQ:AQUA) services over 25,000 customers through 7,800 US sites and 1,800 global ones in a multitude of industries treating water and wastewater. The company operates through Industrial, Municipal