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1. Company Snapshot

1.a. Company Description

Advanced Drainage Systems, Inc.designs, manufactures, and markets thermoplastic corrugated pipes and related water management products, and drainage solutions for use in the underground construction and infrastructure marketplace in the United States, Canada, Mexico, and internationally.The company operates through Pipe, International, Infiltrator, and Allied Products & Other segments.


It offers single, double, and triple wall corrugated polypropylene and polyethylene pipes; plastic leachfield chambers and systems, EZflow synthetic aggregate bundles, mechanical aeration wastewater solutions, septic tanks and accessories, and combined treatment and dispersal systems; and allied products, including storm retention/detention and septic chambers, polyvinyl chloride drainage structures, fittings, and water quality filters and separators.The company also purchases and distributes construction fabrics and other geosynthetic products for soil stabilization, reinforcement, filtration, separation, erosion control, and sub-surface drainage, as well as drainage grates and other products.It offers its products for non-residential, residential, agriculture, and infrastructure applications through a network of approximately 38 distribution centers.


The company was incorporated in 1966 and is headquartered in Hilliard, Ohio.

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1.b. Last Insights on WMS

Advanced Drainage Systems' recent performance was driven by strong Q2 earnings, beating estimates with $1.97 per share, a 15.9% increase year-over-year. The company's water management solutions segment showed resilience. Institutional investors, such as Teacher Retirement System of Texas, raised their stakes, while Hantz Financial Services reduced its position. Impactive Capital recently took a stake, citing underappreciated earnings growth. The company's Fiscal 2025 Sustainability Report demonstrated its commitment to environmental stewardship. A 20-year partnership with Norwegian Cruise Line Holdings Ltd. also contributed to growth.

1.c. Company Highlights

2. Advanced Drainage Systems Posts Strong Q2 Results Amidst Challenging Market Environment

Advanced Drainage Systems delivered a robust financial performance in the second quarter of fiscal year 2026, with revenue growing 9% to $732 million and adjusted EBITDA increasing 17% to $247 million, resulting in an adjusted EBITDA margin of 33.8%, a 60 basis point increase from the previous year. Earnings per share (EPS) came in at $1.97, beating analyst estimates of $1.7. The company's strong margin performance was driven by its strategy to prioritize higher-growth, higher-margin products, execute its material conversion strategy, and implement self-help initiatives to improve safety and productivity.

Publication Date: Nov -09

📋 Highlights
  • Revenue and Adjusted EBITDA Growth: 9% revenue growth and 17% adjusted EBITDA increase, driven by higher-margin product strategies and operational efficiencies.
  • Allied Products Momentum: Double-digit growth in StormTech, Nyloplast, and water quality products, with Infiltrator revenue surging 25% from tanks and advanced treatment systems.
  • Acquisition of NDS: $1 billion all-cash deal valued at 10x NDS’ EBITDA, targeting residential stormwater and irrigation markets for expansion.
  • Free Cash Flow and CapEx: Generated $399 million in free cash flow YTD; $200–225 million allocated to innovation, customer service, and new product development.
  • EBITDA Margin Expansion: 33.8% adjusted EBITDA margin, up 60 bps YoY, reflecting cost discipline and productivity improvements.

Segment Performance

The company's Allied Products segment saw double-digit growth, driven by strong sales of StormTech retention detention chambers, Nyloplast catch basins, and water quality products. Infiltrator revenue increased 25%, driven by double-digit growth in both tanks and advanced treatment products. Pipe revenue grew 1%, with double-digit growth in HP pipe products offset by weakness in the agriculture market. As Michael Higgins noted, the multifamily segment has seen good participation, with Allied Products performing well.

Guidance and Outlook

The company updated its guidance ranges for fiscal 2026, expecting a 2% increase in revenue to $2.945 billion and a 5% increase in adjusted EBITDA to $920 million. Management remains cautious about market demand in the current environment, reflecting this caution in its guidance. Scott Cottrill stated that the company is cautious about the second half, with a 30-40% decremental margin approach, and noted that price-cost is largely stable, with no significant downtrend.

Valuation and Growth Prospects

Advanced Drainage Systems' valuation metrics indicate a premium valuation, with a P/E Ratio of 31.02 and an EV/EBITDA ratio of 15.99. Analysts estimate next year's revenue growth at 1.6%, which may not be sufficient to justify the current valuation. However, the company's strong growth algorithm, driven by its focus on innovation, new product development, and customer service, may support its valuation. With a ROIC of 12.13% and an ROE of 23.13%, the company has demonstrated its ability to generate strong returns on capital.

Acquisition and Synergies

The company's acquisition of NDS is expected to bring significant synergies, with opportunities for channel drains and turf and irrigation products. Trey Grooms asked Scott Barbour about potential revenue synergies with NDS, and Barbour mentioned the ability to package NDS's market-leading standard products effectively. The acquisition is expected to be accretive to margins, with opportunities for margin accretion through automation, productivity, and new product introduction.

3. NewsRoom

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BLI Banque de Luxembourg Investments Acquires 3,800 Shares of Advanced Drainage Systems, Inc. $WMS

Dec -01

Source: defenseworld.net

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Creative Planning Sells 1,481 Shares of Advanced Drainage Systems, Inc. $WMS

Nov -27

Source: defenseworld.net

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Advanced Drainage Systems, Inc. (NYSE:WMS) Receives Consensus Rating of “Moderate Buy” from Brokerages

Nov -15

Source: defenseworld.net

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Advanced Drainage Systems, Inc. (WMS) Q2 2026 Earnings Call Transcript

Nov -06

Source: seekingalpha.com

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Advanced Drainage Systems (WMS) Tops Q2 Earnings and Revenue Estimates

Nov -06

Source: zacks.com

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Advanced Drainage Systems, Inc. $WMS Shares Sold by Hantz Financial Services Inc.

Nov -06

Source: defenseworld.net

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Advanced Drainage Systems, Inc. $WMS Stock Position Raised by Teacher Retirement System of Texas

Nov -06

Source: defenseworld.net

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Impactive Capital sees a structural shift creating upside for this wastewater company

Nov -01

Source: cnbc.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.46%)

6. Segments

Pipe

Expected Growth: 3.2%

Advanced Drainage Systems' 3.2% growth is driven by increasing demand for stormwater management solutions, growth in residential and commercial construction, and rising adoption of sustainable infrastructure practices. Additionally, the company's strategic acquisitions and expansion into new markets have contributed to its growth momentum.

Allied Products and Other

Expected Growth: 3.8%

Advanced Drainage Systems' Allied Products and Other segment growth of 3.8% is driven by increasing demand for stormwater management solutions, expansion into new markets, and strategic acquisitions. Additionally, growth in residential and commercial construction, as well as infrastructure projects, contributes to the segment's growth.

Infiltrator

Expected Growth: 3.5%

Infiltrator's 3.5% growth is driven by increasing adoption in stormwater management, rising demand for sustainable infrastructure, and growing regulatory requirements for water quality management. Additionally, Advanced Drainage Systems' strategic expansion into new markets and product innovations are contributing to the segment's growth.

International

Expected Growth: 4.2%

Advanced Drainage Systems' international segment growth of 4.2% is driven by increasing infrastructure spending, urbanization, and water management needs in emerging markets. Strong demand for stormwater management solutions, coupled with strategic acquisitions and partnerships, have expanded the company's global footprint and contributed to its growth momentum.

7. Detailed Products

Highway Drainage Products

ADS offers a range of drainage products designed for highway applications, including corrugated polyethylene pipes, fittings, and accessories.

Stormwater Management Products

ADS provides a variety of stormwater management products, including stormwater management ponds, detention/retention systems, and green infrastructure solutions.

Agricultural Drainage Products

ADS offers a range of drainage products designed for agricultural applications, including corrugated polyethylene pipes, fittings, and accessories.

Residential Drainage Products

ADS provides a variety of drainage products designed for residential applications, including corrugated polyethylene pipes, fittings, and accessories.

Commercial Drainage Products

ADS offers a range of drainage products designed for commercial applications, including corrugated polyethylene pipes, fittings, and accessories.

Rehabilitation Products

ADS provides a variety of rehabilitation products, including pipe relining and pipe bursting systems.

8. Advanced Drainage Systems, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Advanced Drainage Systems, Inc. is medium due to the availability of alternative products and services in the market.

Bargaining Power Of Customers

The bargaining power of customers for Advanced Drainage Systems, Inc. is low due to the company's strong brand reputation and customer loyalty.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Advanced Drainage Systems, Inc. is medium due to the presence of multiple suppliers in the market.

Threat Of New Entrants

The threat of new entrants for Advanced Drainage Systems, Inc. is low due to the high barriers to entry in the industry.

Intensity Of Rivalry

The intensity of rivalry for Advanced Drainage Systems, Inc. is high due to the presence of several competitors in the market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 50.84%
Debt Cost 8.30%
Equity Weight 49.16%
Equity Cost 11.53%
WACC 9.89%
Leverage 103.43%

11. Quality Control: Advanced Drainage Systems, Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Beacon Roofing Supply

A-Score: 5.0/10

Value: 5.6

Growth: 7.3

Quality: 3.3

Yield: 0.0

Momentum: 8.0

Volatility: 6.0

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LP

A-Score: 4.8/10

Value: 3.8

Growth: 7.0

Quality: 6.6

Yield: 2.0

Momentum: 3.5

Volatility: 5.7

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Builders FirstSource

A-Score: 4.4/10

Value: 5.7

Growth: 8.4

Quality: 6.2

Yield: 0.0

Momentum: 1.5

Volatility: 4.3

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Fortune Brands

A-Score: 4.2/10

Value: 5.1

Growth: 4.6

Quality: 5.1

Yield: 3.0

Momentum: 1.0

Volatility: 6.3

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Advanced Drainage Systems

A-Score: 4.1/10

Value: 2.7

Growth: 6.7

Quality: 6.6

Yield: 0.0

Momentum: 4.0

Volatility: 4.7

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AAON

A-Score: 3.7/10

Value: 2.2

Growth: 8.1

Quality: 5.8

Yield: 0.0

Momentum: 3.0

Volatility: 3.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

150.05$

Current Price

150.05$

Potential

-0.00%

Expected Cash-Flows