American Water Works (AWK) Buy or Sell Stock Guide

Last updated: Jan 24, '19

The analysis below may be 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 / a good investment?
  • What are AWK analyst opinions, recommendations, ratings?

Here are AWK stock buy reasons/signals:

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 forward dividend yield is 2.01%, higher than the industry (1.45%) and sector (1.08%) forward dividend yields.

5. AWK PEG ratio (P/E adjusted for growth) is 3.35, and it’s low compared to its industry peers’ PEG ratios.

6. AWK average analyst rating is Buy.

Here are AWK stock sell reasons/signals:

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 profitability is declining. The YoY profit margin change was -1.48pp.

5. AWK average analyst price target ($91.36) is below its current price ($94.23).

6. AWK short interest (days to cover the shorts) ratio is 4.3. The stock garners more short interest than the average industry, sector or S&P 500 stock.

What are your thoughts on AWK?

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