American Water Works Stock Discussion

Wall Street banks are in a frenzy over "The Next AI Trade," piling into the 'Powering up America' investment themes. These include power grid companies, commodities such as copper and uranium, as well as artificial intelligence chipmakers. However, the issue of water consumption has been relatively overlooked.
JP Morgan recently released a research report titled "Deep Dive into Power,...

The company's ROE is acceptable but not exceptional. Its significant use of debt and fairly low ROE make it less attractive for investment. High-quality companies with high ROEs and low debt are generally preferred.

Mayor Mike Parkinson backs the deal with Illinois American Water, asserting it benefits the Granite City community. He opines the sale will enable city to fund other crucial community needs and trusts Illinois American Water's capability to manage the city's wastewater assets and operations.

The company's ROCE has remained relatively flat and the business has been reinvesting its capital without generating increased returns. This trend does not inspire confidence in the potential for the stock to become a multi-bagger.

American Water Works Company's high P/E ratio is alarming due to its weak earnings outlook and slower market growth. Investors may face disappointment if the P/E falls in line with the growth outlook, risking significant investments and potential overpayment.

American Water Works Company's use of high debt, despite a ROE in line with the industry average, curbs enthusiasm. High-quality companies display high ROE with low debt. Additionally, their ability to outperform in terms of ROE amid similar debt to equity levels is preferred. Factors like profit growth rates versus stock price expectations are also key when assessing business quality.

Salem's takeover by NJ American Water means professional handling of utilities, ensuring safe, affordable services, eradicating $11m in utility debt and adding over $1m annually to the city budget, a major upgrade for city residents.

Despite reinvestment and capital expansion, the company can't generate a higher return on capital. Analysts recommend watching developments due to unimproved trends, despite market expectations banking on past performances.