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

Analyst Recommendations

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

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

American States Water currently has a consensus target price of $40.00, indicating a potential downside of 14.97%. Aqua America has a consensus target price of $31.67, indicating a potential downside of 3.07%. Given Aqua America’s stronger consensus rating and higher probable upside, analysts clearly believe Aqua America is more favorable than American States Water.

Earnings & Valuation

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American States Water $441.37 million 3.90 $157.11 million $1.68 28.00
Aqua America $815.06 million 7.12 $457.59 million $1.30 25.13

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.

Profitability

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

Net Margins Return on Equity Return on Assets
American States Water 14.11% 12.72% 4.30%
Aqua America 28.41% 12.62% 3.80%

Volatility & Risk

American States Water has a beta of 0.46, indicating that its stock price is 54% less volatile than the S&P 500. Comparatively, Aqua America has a beta of 0.53, indicating that its stock price is 47% less volatile than the S&P 500.

Dividends

American States Water pays an annual dividend of $0.97 per share and has a dividend yield of 2.1%. Aqua America pays an annual dividend of $0.77 per share and has a dividend yield of 2.4%. American States Water pays out 57.7% of its earnings in the form of a dividend. Aqua America pays out 59.2% 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 increased its dividend for 62 consecutive years and Aqua America has increased its dividend for 9 consecutive years.

Insider and Institutional Ownership

67.3% of American States Water shares are held by institutional investors. Comparatively, 50.3% of Aqua America shares are held by institutional investors. 1.4% of American States Water shares are held by company insiders. Comparatively, 0.3% of Aqua America shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

Aqua America beats American States Water on 9 of the 17 factors compared between the two stocks.

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.

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.

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