Critical Contrast: American Water (AWK) and Its Competitors

American Water (NYSE: AWK) is one of 15 publicly-traded companies in the “Water supply” industry, but how does it contrast to its peers? We will compare American Water to related companies based on the strength of its valuation, earnings, profitability, dividends, institutional ownership, risk and analyst recommendations.

Dividends

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American Water pays an annual dividend of $1.66 per share and has a dividend yield of 2.0%. American Water pays out 54.8% of its earnings in the form of a dividend. As a group, “Water supply” companies pay a dividend yield of 2.2% and pay out 53.9% of their earnings in the form of a dividend. American Water has raised its dividend for 9 consecutive years. American Water lags its peers as a dividend stock, given its lower dividend yield and higher payout ratio.

Earnings and Valuation

This table compares American Water and its peers top-line revenue, earnings per share and valuation.

Gross Revenue Net Income Price/Earnings Ratio
American Water $3.36 billion $426.00 million 27.04
American Water Competitors $722.21 million $111.68 million 23.06

American Water has higher revenue and earnings than its peers. American Water is trading at a higher price-to-earnings ratio than its peers, indicating that it is currently more expensive than other companies in its industry.

Insider and Institutional Ownership

84.8% of American Water shares are held by institutional investors. Comparatively, 49.2% of shares of all “Water supply” companies are held by institutional investors. 0.3% of American Water shares are held by insiders. Comparatively, 11.2% of shares of all “Water supply” companies are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations for American Water and its peers, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Water 0 6 3 0 2.33
American Water Competitors 86 221 250 13 2.33

American Water presently has a consensus price target of $87.86, suggesting a potential upside of 7.25%. As a group, “Water supply” companies have a potential upside of 5.39%. Given American Water’s higher possible upside, analysts plainly believe American Water is more favorable than its peers.

Volatility & Risk

American Water has a beta of 0.16, meaning that its stock price is 84% less volatile than the S&P 500. Comparatively, American Water’s peers have a beta of 0.51, meaning that their average stock price is 49% less volatile than the S&P 500.

Profitability

This table compares American Water and its peers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Water 12.69% 10.03% 2.83%
American Water Competitors 8.09% 8.85% 2.61%

Summary

American Water beats its peers on 8 of the 14 factors compared.

About American Water

American Water Works Company, Inc., through its subsidiaries, provides water and wastewater services in the United States and Canada. It offers water and wastewater services to approximately 1,600 communities in 16 states. The company operates approximately 72 surface water treatment plants; 527 groundwater treatment plants; 8 combined treatment plants; 127 wastewater treatment plants; 50,382 miles of transmission, distribution, and collection mains and pipes; 1,103 groundwater wells; 1,428 water and wastewater pumping stations; 1,313 treated water storage facilities; and 80 dams. It also undertakes contracts with the United States government to provide water and wastewater services on various military bases; and municipal, commercial, and industrial customers, primarily to operate and manage water and wastewater facilities, as well as provide other related services. In addition, the company provides warranty-type services to homeowners and smaller commercial customers to protect against the cost of repairing broken or leaking water pipes or clogged or blocked sewer pipes, interior electric lines, heating and cooling systems, and water heaters, as well as power surge protection and other related services; and water sourcing, transfer services, pipeline construction, and water storage solutions for natural gas exploration and production companies. Further, it supplies water to public fire hydrants for firefighting purposes, and private fire customers for use in fire suppression systems in office buildings and other facilities, as well as to other water utilities and community water systems. The company serves approximately 15 million people with drinking water, wastewater, and other water-related services in 46 states; the District of Columbia; and Ontario, Canada. The company was founded in 1886 and is based in Voorhees, New Jersey.

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