Head-To-Head Review: American States Water (NYSE:AWR) versus Aqua America (WTR)

Aqua America (NYSE: WTR) and American States Water (NYSE:AWR) are both utilities companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, institutional ownership, dividends, earnings, profitability, analyst recommendations and risk.

Dividends

Aqua America pays an annual dividend of $0.82 per share and has a dividend yield of 2.4%. American States Water pays an annual dividend of $1.02 per share and has a dividend yield of 2.1%. Aqua America pays out 62.6% of its earnings in the form of a dividend. American States Water pays out 55.1% 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. Aqua America has raised its dividend for 62 consecutive years and American States Water has raised its dividend for 9 consecutive years. Aqua America is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk & Volatility

Aqua America has a beta of 0.52, suggesting that its share price is 48% less volatile than the S&P 500. Comparatively, American States Water has a beta of 0.47, suggesting that its share price is 53% less volatile than the S&P 500.

Profitability

This table compares Aqua America and American States Water’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Aqua America 28.59% 12.51% 3.75%
American States Water 15.44% 13.70% 4.67%

Analyst Ratings

This is a breakdown of recent ratings and target prices for Aqua America and American States Water, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Aqua America 1 2 2 0 2.20
American States Water 1 1 0 0 1.50

Aqua America presently has a consensus target price of $31.67, indicating a potential downside of 5.64%. American States Water has a consensus target price of $41.00, indicating a potential downside of 16.12%. Given Aqua America’s stronger consensus rating and higher possible upside, research analysts plainly believe Aqua America is more favorable than American States Water.

Institutional and Insider Ownership

50.9% of Aqua America shares are owned by institutional investors. Comparatively, 66.4% of American States Water shares are owned by institutional investors. 0.3% of Aqua America shares are owned by insiders. Comparatively, 1.4% of American States Water shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares Aqua America and American States Water’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Aqua America $814.60 million 7.32 $460.10 million $1.31 25.62
American States Water $442.61 million 4.05 $158.76 million $1.85 26.42

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

Summary

Aqua America beats American States Water on 10 of the 17 factors compared between the two stocks.

About Aqua America

Aqua America, Inc. is a holding company. The Company is engaged in providing water or wastewater services concentrated in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana and Virginia. The Company is the holding company for its primary subsidiary, Aqua Pennsylvania, Inc. Its market-based activities are conducted through Aqua Resources, Inc. (Aqua Resources) and Aqua Infrastructure, LLC (Aqua Infrastructure). Aqua Resources, Inc. provides water and wastewater service through operating and maintenance contracts with municipal authorities and other parties close to its utility companies’ service territories, and offers, through a third party, water and sewer line repair service and protection solutions to households. Aqua Infrastructure provides non-utility raw water supply services for firms in the natural gas drilling industry. The Company owns several wastewater collection systems that convey the wastewater to a municipally-owned facility for treatment.

About American States Water

American States Water Company (AWR) is a holding company. The Company is the parent company of Golden State Water Company (GSWC) and American States Utility Services, Inc. (ASUS), as well as ASUS’ subsidiaries, such as Fort Bliss Water Services Company (FBWS), Terrapin Utility Services, Inc. (TUS), Old Dominion Utility Services, Inc. (ODUS), Palmetto State Utility Services, Inc. (PSUS) and Old North Utility Services, Inc. (ONUS). The Company’s segments include water, electric and contracted services. Within the segments, AWR has two principal business units, water and electric service utility operations, conducted through GSWC, and contracted services conducted through ASUS and its subsidiaries. GSWC is a public utility engaged principally in the purchase, production, distribution and sale of water. As of December 31, 2016, GSWC was engaged in purchase, production, distribution and sale of water in 10 counties in the State of California.

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