American Water Works (AWK) Buy or Sell Stock Guide

Last updated: May 12, '19

Are you looking for the analysis of American Water Works (AWK) stock? Are you wondering what the bulls and the bears say about it?

If so, you came to the right place. In this stock guide, we will share with you 7 reasons to buy and 7 reasons to sell AWK stock. You’ll get a perspective on what the bulls and the bears say about it.

The analysis below may be also helpful to you if you have any of the following questions about AWK stock:

  • Is AWK a buy or a sell?
  • Should I sell or hold AWK stock today?
  • Is AWK a good buy / investment?
  • What are AWK analyst opinions, recommendations and ratings?

Let’s start with the bull case. Here are the reasons to buy AWK stock:

1. Dividend growth should average 10% annually over the next five years.

2. American Water's size should be an advantage in pursuing new customers and acquisitions in the coming years. Tuck-ins to existing systems are a cheap source of growth if the price is reasonable.

3. Much of America's water infrastructure is old and poorly maintained. An EPA estimate put the cost of updating community infrastructure at close to $350 billion for drinking water alone.

4. AWK profitability is improving. The YoY profit margin change was 3.79percentage points. See AWK profitability chart.

5. AWK forward dividend yield is 1.75%, higher than the industry (1.23%) and sector (1.02%) forward dividend yields. See AWK forward dividend chart.

6. AWK PEG ratio (P/E adjusted for growth) is 3.61, and it’s low compared to its industry peers’ PEG ratios. See AWK PEG chart.

7. AWK average analyst rating is Buy. See AWK analyst rating chart.

Now that you understand the bull case, let’s look at the reasons to sell AWK stock (i.e., the bear case):

1. American Water's sizable plans for infrastructure replacement and upgrades will run into some pushback from rising rates for water that has traditionally been cheap.

2. Conservation is biting into weather-adjusted usage across American Water's territories, requiring higher rates to maintain returns.

3. Acquisitions of regulated utilities can be difficult and time-consuming and sometimes end in failures.

4. AWK stock price ($108.27) is at the 52-week high. Perhaps now is a good time to sell? See AWK price chart.

5. AWK quarterly revenue growth was 3.50%, lower than the industry and sector average revenue growth (4.55% and 4.79%, respectively). See AWK revenue growth chart.

6. AWK average analyst price target ($107.00) is below its current price ($108.27). See AWK price target chart.

7. AWK short interest (days to cover the shorts) ratio is 4.51. The stock garners more short interest than the average industry, sector or S&P 500 stock. See AWK short interest ratio chart.

Now let's look at the key statistics for AWK:

Metrics AWK
Price $113.70
Average Price Target / Upside $107.00 / -5.89%
Average Analyst Rating Buy
Industry Utilities - Regulated Water
Sector Utilities
Number of Employees 7,100
Market Cap $19.56B
Forward P/E Ratio 28.16
Price/Book Ratio 5.68
PEG 3.75
Revenue (TTM) $3.49B
YoY Quarterly Revenue Growth 6.8%
Profit Margin 16.44%

What are your thoughts on AWK?

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