Financial Review: California Water Service Group Holding (CWT) vs. American States Water (AWR)

American States Water (NYSE: AWR) and California Water Service Group Holding (NYSE:CWT) are both small-cap utilities companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Insider and Institutional Ownership

66.4% of American States Water shares are owned by institutional investors. Comparatively, 68.3% of California Water Service Group Holding shares are owned by institutional investors. 1.4% of American States Water shares are owned by company insiders. Comparatively, 1.0% of California Water Service Group Holding shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Volatility & Risk

American States Water has a beta of 0.47, meaning that its share price is 53% less volatile than the S&P 500. Comparatively, California Water Service Group Holding has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and recommmendations for American States Water and California Water Service Group Holding, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American States Water 1 1 0 0 1.50
California Water Service Group Holding 2 5 0 0 1.71

American States Water currently has a consensus price target of $41.00, indicating a potential downside of 16.12%. California Water Service Group Holding has a consensus price target of $32.25, indicating a potential downside of 12.36%. Given California Water Service Group Holding’s stronger consensus rating and higher probable upside, analysts clearly believe California Water Service Group Holding is more favorable than American States Water.

Profitability

This table compares American States Water and California Water Service Group Holding’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American States Water 15.44% 13.70% 4.67%
California Water Service Group Holding 9.17% 8.78% 2.36%

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American States Water $442.61 million 4.05 $158.76 million $1.85 26.42
California Water Service Group Holding $628.37 million 2.81 $183.94 million $1.20 30.67

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

Dividends

American States Water pays an annual dividend of $1.02 per share and has a dividend yield of 2.1%. California Water Service Group Holding pays an annual dividend of $0.72 per share and has a dividend yield of 2.0%. American States Water pays out 55.1% of its earnings in the form of a dividend. California Water Service Group Holding pays out 60.0% 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 States Water has raised its dividend for 49 consecutive years and California Water Service Group Holding has raised its dividend for 62 consecutive years. American States Water is clearly the better dividend stock, given its higher yield and lower payout ratio.

American States Water Company Profile

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.

California Water Service Group Holding Company Profile

California Water Service Group is a holding company. The Company operates through the supply and distribution of water and providing water-related utility services segment. The Company, through its subsidiaries, provides non-regulated services and non-regulated services to private companies and municipalities. The bulk of the business consists of the production, purchase, storage, treatment, testing, distribution and sale of water for domestic, industrial, public and irrigation uses, and for fire protection. It also provides non-regulated water-related services. The non-regulated services include water system operation, billing and meter reading services. Non-regulated operations also include the lease of communication antenna sites, lab services and promotion of other non-regulated services. The Company under its non-regulated contract arrangements, operates municipally owned water systems, privately owned water and recycled water distribution systems.

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