Analyzing American Water (AWK) and California Water Service Group (CWT)

American Water (NYSE: AWK) and California Water Service Group (NYSE:CWT) are both utilities companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, valuation, earnings, risk, profitability and dividends.

Earnings & Valuation

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This table compares American Water and California Water Service Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Water $3.36 billion 4.36 $426.00 million $3.03 27.05
California Water Service Group $666.89 million 2.64 $67.18 million $1.40 26.21

American Water has higher revenue and earnings than California Water Service Group. California Water Service Group is trading at a lower price-to-earnings ratio than American Water, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations for American Water and California Water Service Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Water 0 6 3 0 2.33
California Water Service Group 1 5 0 0 1.83

American Water currently has a consensus price target of $87.86, indicating a potential upside of 7.21%. California Water Service Group has a consensus price target of $34.00, indicating a potential downside of 7.36%. Given American Water’s stronger consensus rating and higher possible upside, analysts plainly believe American Water is more favorable than California Water Service Group.

Risk and Volatility

American Water has a beta of 0.16, suggesting that its stock price is 84% less volatile than the S&P 500. Comparatively, California Water Service Group has a beta of 0.65, suggesting that its stock price is 35% less volatile than the S&P 500.

Dividends

American Water pays an annual dividend of $1.66 per share and has a dividend yield of 2.0%. California Water Service Group pays an annual dividend of $0.75 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. California Water Service Group pays out 53.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. American Water has increased its dividend for 9 consecutive years and California Water Service Group has increased its dividend for 50 consecutive years. California Water Service Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares American Water and California Water Service Group’s 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%
California Water Service Group 10.07% 9.97% 2.60%

Institutional and Insider Ownership

84.8% of American Water shares are held by institutional investors. Comparatively, 70.1% of California Water Service Group shares are held by institutional investors. 0.3% of American Water shares are held by company insiders. Comparatively, 1.0% of California Water Service Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

American Water beats California Water Service Group on 12 of the 17 factors compared between the two stocks.

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.

About California Water Service Group

California Water Service Group, through its subsidiaries, provides water utility and other related services in California, Washington, New Mexico, and Hawaii. It is involved in the production, purchase, storage, treatment, testing, distribution, and sale of water for domestic, industrial, public, and irrigation uses, as well as for fire protection. The company offers its services to approximately 484,900 customers in 100 California communities; approximately 4,500 water and wastewater customers on the islands of Maui and Hawaii; approximately 16,800 customers in the Tacoma and Olympia areas in Washington; and approximately 8,100 water and wastewater customers in the Belen, Los Lunas, and Elephant Butte areas in New Mexico. It also engages in the provision of non-regulated water-related services, including operating municipally owned water systems, privately owned water, and recycled water distribution systems; providing operational and maintenance, meter reading, and billing services to private companies and municipalities; leasing communication antenna sites on its properties to telecommunication companies; billing optional third-party insurance programs to its residential customers; and providing lab services. California Water Service Group was founded in 1926 and is headquartered in San Jose, California.

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