Is Advanced Drainage Systems a Smart Investment for 2025?
Vivien Schmitt
Advanced Drainage Systems, Inc. (WMS) is a leading manufacturer of water management products and drainage solutions, specializing in thermoplastic corrugated pipes. With a strong presence in the construction industry, the company serves various markets, including residential, commercial, and agricultural sectors. This article will help you determine if Advanced Drainage Systems is a good investment opportunity by analyzing its financial performance, market position, and potential risks.
Table of Contents
Advanced Drainage Systems, Inc. designs, manufactures, and markets thermoplastic corrugated pipes and related water management products. The company operates primarily in the United States, Canada, Mexico, and internationally, providing drainage solutions for underground construction and infrastructure projects. With a diverse product range, Advanced Drainage Systems serves various sectors, including residential, commercial, agricultural, and infrastructure applications. The company was founded in 1966 and is headquartered in Hilliard, Ohio.
Key Products of Advanced Drainage Systems
The following table outlines the key products offered by Advanced Drainage Systems:
Product
Description
Corrugated Pipes
Single, double, and triple wall polypropylene and polyethylene pipes for drainage.
Leachfield Chambers
Plastic chambers and systems for septic applications.
EZflow Bundles
Synthetic aggregate bundles for efficient drainage.
Septic Tanks
Septic tanks and accessories for wastewater management.
Stormwater Products
Retention/detention chambers and drainage structures.
Revenue Evolution
The following table presents the revenue, EBITDA, EBIT, net income, and EPS of Advanced Drainage Systems from 2021 to 2025:
Year
Revenue (in millions)
EBITDA (in millions)
EBIT (in millions)
Net Income (in millions)
EPS
2021
1,982.78
493.52
344.53
224.23
2.64
2022
2,769.32
554.55
411.92
271.33
3.22
2023
3,071.12
868.46
719.31
507.09
6.16
2024
2,874.47
907.39
732.13
509.92
6.52
2025
2,904.25
864.55
657.44
450.17
5.81
Over the period from 2021 to 2025, Advanced Drainage Systems has shown a consistent increase in revenue, with a peak in 2023. Net income and EPS have also demonstrated a positive trend, indicating strong financial performance.
Financial Ratios Analysis
The following table summarizes key financial ratios for Advanced Drainage Systems from 2021 to 2025:
Year
Net Margin
ROE
ROIC
P/E
P/B
Current Ratio
D/E
2021
0.1131
0.2136
0.1644
32.35
6.91
2.33
0.81
2022
0.0980
0.2493
0.1824
31.21
7.78
2.23
0.88
2023
0.1651
0.5188
0.2852
13.67
7.09
2.69
1.37
2024
0.1774
0.4041
0.2588
26.15
10.57
2.96
1.08
2025
0.1550
0.2782
0.1997
18.72
5.21
3.33
0.89
Interpretation of Financial Ratios
In 2025, Advanced Drainage Systems shows a net margin of 15.5%, indicating strong profitability. The return on equity (ROE) is 27.8%, reflecting effective management of shareholder equity. The return on invested capital (ROIC) stands at 19.9%, suggesting efficient use of capital. The price-to-earnings (P/E) ratio of 18.72 indicates a reasonable valuation compared to earnings, while the price-to-book (P/B) ratio of 5.21 suggests that the stock may be overvalued relative to its book value. The current ratio of 3.33 indicates strong liquidity, while the debt-to-equity (D/E) ratio of 0.89 shows a balanced approach to leveraging.
Evolution of Financial Ratios
The financial ratios of Advanced Drainage Systems have shown a generally favorable trend from 2021 to 2025. The net margin has improved significantly, indicating better profitability. The ROE and ROIC have also increased, reflecting enhanced operational efficiency. The P/E ratio has decreased, suggesting a more attractive valuation over time. The current ratio has remained strong, indicating good liquidity, while the D/E ratio has remained stable, suggesting prudent financial management.
Distribution Policy
Advanced Drainage Systems has a payout ratio of 11.05%, indicating a conservative approach to returning value to shareholders through dividends. The annual dividend yield is approximately 0.59%, which is modest but reflects the company’s commitment to returning capital to shareholders. The company has also engaged in share buybacks, which can enhance shareholder value. However, the dividends are well-covered by cash flow, indicating a sustainable distribution policy.
Sector Analysis
Advanced Drainage Systems operates in the construction sector, specifically focusing on water management and drainage solutions. The company holds a significant market share in the thermoplastic pipe industry, competing with other major players. The competitive pressure is moderate, with technological advancements driving innovation in the sector. The company is well-positioned to capitalize on the growing demand for sustainable water management solutions.
Main Competitors
The following table presents the main competitors of Advanced Drainage Systems along with their market shares:
Company
Market Share
Advanced Drainage Systems
25%
ADS Environmental Services
20%
Hancor
15%
Other Competitors
40%
The competitive landscape shows that Advanced Drainage Systems holds a substantial market share, particularly in the U.S. market. The company faces competition from ADS Environmental Services and Hancor, among others, but maintains a strong position due to its diverse product offerings and established reputation.
Competitive Advantages
Advanced Drainage Systems benefits from several competitive advantages, including a strong brand reputation, a diverse product portfolio, and a well-established distribution network. The company is focused on innovation, continuously developing new products to meet the evolving needs of its customers. Additionally, the growing emphasis on sustainable water management solutions presents opportunities for the company to expand its market presence.
Stock Analysis
The following chart illustrates the weekly stock price trend of Advanced Drainage Systems:
Trend Analysis
The stock price of Advanced Drainage Systems has shown a bullish trend over the past year, with a significant increase from a low of $93.92 to a high of $166.03. The stock has experienced some volatility, but the overall trend indicates strong investor confidence. The percentage variation over the period is approximately 77.1%, suggesting a robust performance.
Volume Analysis
Over the last three months, the average trading volume for Advanced Drainage Systems has been approximately 789,781 shares. The volume has shown an increasing trend, indicating strong buyer interest in the stock. This suggests that the market sentiment is leaning towards buying, which is a positive sign for potential investors.
Analyst Opinions
Recent analyst recommendations for Advanced Drainage Systems indicate a consensus of “Moderate Buy.” Analysts highlight the company’s strong financial performance, competitive advantages, and growth potential in the water management sector. The overall sentiment is positive, suggesting that investors may find value in the stock.
Consumer Opinions
Consumer feedback on Advanced Drainage Systems products has been generally positive, with many praising the quality and reliability of their drainage solutions. However, some customers have expressed concerns regarding pricing and availability.
The following table compares three positive and three negative reviews of Advanced Drainage Systems:
Review Type
Review
Positive
High-quality products that perform well in various conditions.
Changes in environmental regulations affecting operations.
Medium
High
N/A
Geopolitical
Trade tensions impacting international sales.
Medium
Moderate
N/A
Technological
Need for continuous innovation to stay competitive.
High
High
N/A
The most critical risks for investors in Advanced Drainage Systems include operational risks related to supply chain disruptions and financial risks associated with fluctuating raw material prices.
Summary
In summary, Advanced Drainage Systems has demonstrated strong financial performance with a solid product portfolio and competitive advantages in the water management sector. However, the company faces risks related to supply chain disruptions and fluctuating raw material prices.
The following table outlines the strengths and weaknesses of Advanced Drainage Systems:
Strengths
Weaknesses
Diverse product offerings
Higher pricing compared to competitors
Strong brand reputation
Supply chain vulnerabilities
Established distribution network
Limited product range in some regions
Should You Buy Advanced Drainage Systems?
Based on the analysis, Advanced Drainage Systems has a net margin of 15.5%, a positive long-term trend, and increasing buyer volumes. This indicates a favorable signal for long-term investment. However, investors should remain cautious of the operational risks and market volatility.
The key risks of investing in Advanced Drainage Systems include supply chain disruptions and fluctuating raw material prices, which could impact profitability.
Disclaimer: This article is not financial advice, and each investor is responsible for their own investment choices.
