Essential Utilities 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,...

Analysts are more pessimistic, trimming Essential Utilities' revenue forecasts. They expect its revenue growth to slow down substantially, with revenues to the end of 2024 expected to display 15% growth. This is compared to a historical growth rate of 22% over the past five years. However, it is still expected to grow faster than the wider industry.

Essential Utilities' high P/E ratio is alarming due to its weaker earnings outlook compared to the market. The high P/E, weak earnings outlook, and slower market growth suggest a potential share price decline.

Cordia's CEO, Earl Collins, is thrilled about the acquisition, stating it bolsters Cordia's presence in Pittsburgh and underscores their dedication to providing efficient, sustainable energy solutions. The acquisition is viewed as a pledge to Cordia's regional growth and customer base expansion.

The company's ROE is acceptable but not exceptional. High debt usage combined with low ROE is unappealing. Companies with high ROE and low debt are usually good quality. If two companies have similar debt to equity, the one with higher ROE is preferred.

WTRG's positive outlook is already reflected in its fair value share price. However, the encouraging outlook suggests it's worth investigating other factors like balance sheet strength for the next price drop.

Insider transactions suggest a positive outlook for Essential Utilities' stocks with more purchases than sales, even at higher prices, reflecting insiders' faith in stock value. However, the ownership by insiders is only considerable, not extremely high.

Despite Essential Utilities' use of significant debt to boost returns, its ROE is considered low, which is not seen positively. It is advisable for investors to consider how a company might perform if it couldn't borrow as easily.