AWR or CWT: Which Water Utility Stock to Add to Your Portfolio? – August 27, 2021


The Zacks Utility – Water Supply industry includes companies that are involved in providing drinking water and wastewater services to industrial, commercial and residential customer classes along with numerous military bases across the country.

Continuous uninterrupted supply of clean potable water and reliable sewer services are essential for healthy and hygienic living. Water utilities across the United States are silently doing this important task day in and day out to meet the increasing demand of millions of Americans.

Utility operators own storage tanks, treatment plants and desalination plants to supply uninterrupted potable water across customer classes. Water utility operators also own more than 2 million miles of pipelines that are getting old.

The water and wastewater infrastructure is aging, and is gradually nearing the end of its effective service life. Per the U.S Environmental Protection Agency, an estimated $750 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years.

Given the current situation, investor-owned water utilities and government are funding water and wastewater infrastructure projects to upgrade the necessary infrastructure.

In this article, we run a comparative analysis on two Utility – Water Supply companies — Middlesex Water Company (MSEX Free Report) and California Water Service Group (CWT Free Report) — to decide which stock is a better pick for your portfolio now.

Both the stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Middlesex Water has a market capitalization of $1.9 billion, while California Water Service has $3.2 billion.

Growth Projections

The Zacks Consensus Estimate for Middlesex Water Company’s 2021 earnings per share and revenues is pegged at $2.27 and $0.2 billion, respectively. The bottom-line estimate has increased 3.7% in the past 30 days.

The Zacks Consensus Estimate for California Water Service’s 2021 earnings per share and revenues is pegged at $1.79 and $0.8 billion, respectively. The bottom-line estimate has increased 2.9% in the past 60 days.

Price Performance

In the past 12 months, Middlesex Water’s shares have gained 64.3% compared with the industry’s rally of 19.7%. Shares of California Water Service’s have gained 34.8% in the same time frame.


Image Source: Zacks Investment Research

Debt to Capital

Debt to capital is a good indicator of a company’s financial position. The indicator shows how much debt is used to run the business. Middlesex Water and California Water Service have a debt to capital of 43.28% and 51.4%, respectively, compared with the industry’s 47.48%.

Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12 months for Middlesex Water’s and California Water Service is 11.2% and 15.71%, respectively. Both the companies have outperformed the industry’s ROE of 10.56%.

Dividend Yield

Utility companies generally distribute dividends. Currently, the dividend yield of Middlesex Water is 1.01%, while the same for California Water Service is 1.46%. Average dividend yield of the industry is 1.46%.

Outcome

Both the companies are efficiently providing water and wastewater services to their customers. They are evenly matched and are good picks for your portfolio. But our choice at this moment is Middlesex Water, given its better earnings estimates revision, lower debt level and strong performance in comparison to California Water Service.





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