Comparing American Water Works (AWK) and Connecticut Water Service (CTWS)

American Water Works (NYSE: AWK) and Connecticut Water Service (NASDAQ:CTWS) are both utilities companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, valuation, analyst recommendations, risk, institutional ownership and dividends.

Analyst Ratings

This is a breakdown of recent ratings for American Water Works and Connecticut Water Service, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Water Works 0 4 4 0 2.50
Connecticut Water Service 0 1 0 0 2.00

American Water Works currently has a consensus price target of $81.67, suggesting a potential upside of 0.28%. Connecticut Water Service has a consensus price target of $52.00, suggesting a potential downside of 6.37%. Given American Water Works’ stronger consensus rating and higher possible upside, equities research analysts plainly believe American Water Works is more favorable than Connecticut Water Service.

Valuation & Earnings

This table compares American Water Works and Connecticut Water Service’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Water Works $3.33 billion 4.36 $1.66 billion $2.65 30.73
Connecticut Water Service $101.43 million 6.34 $44.36 million $2.00 27.77

American Water Works has higher revenue and earnings than Connecticut Water Service. Connecticut Water Service is trading at a lower price-to-earnings ratio than American Water Works, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares American Water Works and Connecticut Water Service’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Water Works 14.20% 9.70% 2.77%
Connecticut Water Service 21.37% 9.21% 2.80%

Risk and Volatility

American Water Works has a beta of 0.25, meaning that its share price is 75% less volatile than the S&P 500. Comparatively, Connecticut Water Service has a beta of 0.09, meaning that its share price is 91% less volatile than the S&P 500.

Institutional and Insider Ownership

80.7% of American Water Works shares are held by institutional investors. Comparatively, 46.6% of Connecticut Water Service shares are held by institutional investors. 0.3% of American Water Works shares are held by company insiders. Comparatively, 2.5% of Connecticut Water Service shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

American Water Works pays an annual dividend of $1.66 per share and has a dividend yield of 2.0%. Connecticut Water Service pays an annual dividend of $1.19 per share and has a dividend yield of 2.1%. American Water Works pays out 62.6% of its earnings in the form of a dividend. Connecticut Water Service pays out 59.5% 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 Water Works has increased its dividend for 8 consecutive years and Connecticut Water Service has increased its dividend for 47 consecutive years. Connecticut Water Service is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

American Water Works beats Connecticut Water Service on 10 of the 17 factors compared between the two stocks.

American Water Works Company Profile

American Water Works Company, Inc. is a holding company for regulated and market-based subsidiaries throughout the United States and Ontario, Canada. The Company’s Regulated Businesses segment provides water and wastewater services as public utilities in 16 states in the United States as of December 31, 2016. The Market-Based Businesses consists of four segments, including Military Services Group, which conducts operation and maintenance (O&M) of water and wastewater systems for military bases; Contract Operations Group, which conducts O&M of water and wastewater facilities for municipalities and the food and beverage industry; Homeowner Services Group, which primarily provides water and sewer line protection plans for homeowners, and Keystone, which provides water services for natural gas exploration and production companies. The Company, through its subsidiary, American Water Works Service Company, Inc. provides support and operational services for its operating subsidiaries.

Connecticut Water Service Company Profile

Connecticut Water Service, Inc. is a non-operating holding company. The Company’s income is derived from the earnings of its subsidiary companies, including The Connecticut Water Company (Connecticut Water), The Maine Water Company (Maine Water), New England Water Utility Services, Inc. (NEWUS),The Avon Water Company (AWC) and Chester Realty Company (Chester Realty). It operates through three segments: Water Operations, Real Estate Transactions, and Services and Rentals. The Water Activities segment consists of its regulated water activities to supply public drinking water to customers. The Real Estate Transactions segment involves the sale or donation for income tax benefits of its real estate holdings. Services and Rentals segment provides contracted services to water and wastewater utilities and other clients, and also leases certain of the Company’s properties to third parties through unregulated companies in the State of Connecticut and through Maine Water in the State of Maine.

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