Advanced Drainage has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 5.9% to $142.68 per share while the index has gained 6.4%.
Is now a good time to buy WMS? Find out in our full research report, it’s free.
Why Does Advanced Drainage Spark Debate?
Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE: WMS) provides clean water management solutions to communities across America.
Two Positive Attributes:
1. Operating Margin Reveals a Well-Run Organization
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Advanced Drainage has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 21.6%. This result isn’t surprising as its high gross margin gives it a favorable starting point.
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Advanced Drainage’s margin expanded by 16.3 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Advanced Drainage’s free cash flow margin for the trailing 12 months was 19.3%.
One Reason to be Careful:
Lackluster Revenue Growth
Long-term growth is the most important, but within industrials, a stretched historical view may miss new industry trends or demand cycles. Advanced Drainage’s recent performance shows its demand has slowed as its annualized revenue growth of 2.6% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
Final Judgment
Advanced Drainage has huge potential even though it has some open questions, but at $142.68 per share (or 22.2× forward P/E), is now the time to initiate a position? See for yourself in our full research report, it’s free.
Stocks We Like Even More Than Advanced Drainage
ALSO WORTH WATCHING: Top 5 Momentum Stocks. The best time to own a great stock is when the market is finally noticing it. These aren't just high-quality businesses. Something is happening with them right now. Elite fundamentals meeting near-term momentum - both boxes checked at the same time.
Find out which stocks our AI platform is flagging this week. See this week's Strong Momentum stocks - FREE. Get Our Strong Momentum Stocks for Free HERE.
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
