Aqua America Inc. (NYSE: WTR) has a solid business model, a history of steady earnings growth, and a growing dividend.
The Company may be able to sustain solid returns as it benefits from the investment of more than $700 billion in the nation's water and wastewater infrastructure recommended by the EPA over the next two decades.
Aqua America expects to grow its customer base not only through acquisitions but also organically, as it is well positioned in states such as North Carolina and Texas, where population growth is above the national average.
The Company also benefits from an experienced management team and balanced rate regulation.
The U.S. water industry is extremely fragmented, with more than 53,000 individual water systems. Many of these systems cannot afford to meet the EPA's increasingly stringent standards and have put themselves up for sale.
In fact, several companies have sought to be acquired by Aqua America. The range of acquisition targets has also grown as cash-strapped municipalities look to monetize their utility assets.
WTR may have the opportunity to acquire additional municipal water systems in the coming years at attractive prices. Key risks for water utilities include the effect of adverse weather on revenues, regulatory issues (especially related to construction cost recovery), and potential environmental and safety-related liabilities.
Over the last year, WTR returned +22.84%. This return is higher than Utilities sector (11.80%), Water Utilities industry (18.73%), S&P 500 (17.22%) returns.
The analysis below may be helpful to you if you have any of the following questions about WTR stock:
1. WTR profitability is improving. The YoY profit margin change was 3.78pp.
2. WTR forward dividend yield is 2.30%, higher than the industry (1.94%) and sector (1.57%) forward dividend yields.
3. WTR average analyst rating is Buy.
1. WTR stock price ($36.03) is at the 52-week high. Perhaps now is a good time to sell?
2. WTR quarterly revenue growth was -0.20%, lower than the industry and sector average revenue growth (8.21% and 6.45%, respectively).
3. WTR forward P/E ratio is 24.64, and it’s high compared to its industry peers’ P/E ratios.
4. WTR Price/Book ratio is 3.32, and it’s high compared to its industry peers’ P/B ratios.
5. WTR Price/Sales ratio is 7.74, and it’s high compared to its industry peers’ P/S ratios.
6. WTR average analyst price target ($35.63) is below its current price ($36.03).
What are your thoughts on WTR?
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