Financial Analysis: American States Water (AWR) & AquaVenture (WAAS)

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

Analyst Ratings

This is a breakdown of recent ratings for AquaVenture and American States Water, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AquaVenture 0 0 4 1 3.20
American States Water 2 1 0 0 1.33

AquaVenture currently has a consensus target price of $22.00, indicating a potential upside of 47.26%. American States Water has a consensus target price of $44.50, indicating a potential downside of 18.97%. Given AquaVenture’s stronger consensus rating and higher probable upside, analysts plainly believe AquaVenture is more favorable than American States Water.

Insider and Institutional Ownership

36.8% of AquaVenture shares are held by institutional investors. Comparatively, 65.0% of American States Water shares are held by institutional investors. 55.9% of AquaVenture shares are held by insiders. Comparatively, 1.5% of American States Water shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Risk and Volatility

AquaVenture has a beta of 1.25, indicating that its stock price is 25% more volatile than the S&P 500. Comparatively, American States Water has a beta of 0.48, indicating that its stock price is 52% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
AquaVenture -22.56% -7.38% -5.01%
American States Water 15.28% 13.34% 4.59%

Dividends

American States Water pays an annual dividend of $1.02 per share and has a dividend yield of 1.9%. AquaVenture does not pay a dividend. American States Water pays out 55.7% of its earnings in the form of a dividend. AquaVenture has raised its dividend for 63 consecutive years.

Valuation and Earnings

This table compares AquaVenture and American States Water’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AquaVenture $114.10 million 3.46 -$20.47 million ($1.01) -14.79
American States Water $436.09 million 4.62 $59.74 million $1.83 30.01

American States Water has higher revenue and earnings than AquaVenture. AquaVenture 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

American States Water beats AquaVenture on 10 of the 18 factors compared between the two stocks.

About AquaVenture

AquaVenture Holdings Limited is a multinational provider of Water-as-a-Service solutions. The Company’s segments are Seven Seas Water and Quench. The Seven Seas Water segment provides outsourced desalination solutions and wastewater treatment for governmental, municipal, industrial and hospitality customers. The Quench segment provides bottleless filtered water coolers and other products that use filtered water as an input, such as ice machines, sparkling water dispensers and coffee brewers, to customers throughout the United States typically under multi-year contracts. The Company’s solutions utilize seawater reverse osmosis and other purification technologies to produce potable and industrial process water in high volumes for customers operating in regions with limited access to potable water. As of December 31, 2016, it operated 10 water treatment facilities in the Caribbean region and South America producing approximately eight billion gallons of purified water per year.

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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