American Water Works Company (AWK) Updates Desalination Plans, Is The Stock Now Too Pricey?

American Water Works Company (AWK) drew fresh attention after California American Water updated regulators on the Monterey Peninsula desalination project, highlighting higher estimated costs and outlining financing and ratemaking steps intended to ease the long-term bill impact for customers.

Those desalination headlines landed while American Water Works Company shares were already in an upswing, with a 7 day share price return of 5.79% and a 30 day gain of 9.04%. However, the 1 year total shareholder return is a more modest 3.57%, suggesting short term momentum has picked up while longer term results have been steadier.

Scan how American Water Works Company stacks up against other regulated utilities by running your eye over 30 resilient stocks with low risk scores with similar resilience profiles and steadier return patterns.

That short burst of gains pulls American Water Works Company into a tug of war between investors who see regulated resilience and those focused on desal cost risks. Which side does the current valuation support next?

Most Popular Narrative: 1% Overvalued

Compared to the narrative fair value of $141.45, American Water Works Company last closed at $142.75, so the story being told by the market is only slightly richer than that reference point and leaves limited room for error around execution.

For this approach to be effective, American Water Works Company needs to execute its roughly US$48b capital plan and maintain regulatory support that allows timely recovery of infrastructure, PFAS, and digital investments while keeping bills affordable.

At a fair valuation, the current share price implies that investors are already pricing in sustained EPS and dividend growth within the company’s stated 7% to 9% range and delivery of the long term capital and consolidation agenda.

See why 35 investors see American Water Works Company as 1% overvalued.

Result: Fair Value of $141.45 (OVERVALUED)

Still, the narrative around American Water Works Company could unravel if its roughly US$48b capital plan fails to earn through the rate base, or if merger integration drags on margins.

Find out about the key risks to this American Water Works Company narrative.

Next Steps

If this mix of optimism and concern around American Water Works Company feels finely balanced, consider acting now by reviewing both sides of the story through the 2 key rewards and 2 important warning signs.

Looking for more investment ideas beyond American Water Works Company?

If American Water Works Company already sits on your radar, broaden your opportunity set by scanning targeted lists of stocks that fit different roles in your portfolio.

• Strengthen your defense and focus on resilience by checking out companies picked for their lower risk profiles through 30 resilient stocks with low risk scores.
• Hunt for value and compare price against quality by reviewing the 29 high quality undervalued stocks that match your return and risk preferences.
• Add income candidates to your watchlist by sizing up yield focused opportunities inside the 5 dividend fortresses.

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