CWCO or SJW: Which Is a Better Utility Water Supply Stock?
The Zacks Utility - Water Supply industry includes companies that are involved in providing drinking water and wastewater services to industrial, commercial and residential customer classes, along with numerous military bases across the country.
Healthy and hygienic living requires a constant, uninterrupted flow of clean potable water and reliable sewer services. Water utilities carry out the crucial work every day to meet millions of Americans’ increasing demand for potable water. Storage tanks, treatment facilities and desalination facilities are owned by utility operators to provide continuous potable water to all classes of customers.
Water utility operators also own more than 2 million miles of aging pipelines. Per the U.S. Environmental Protection Agency, investments of more than $744 billion are required for water and wastewater infrastructure improvements over the next 20 years.
Investor-owned water utilities and the government are sponsoring water and wastewater infrastructure projects to modernize the required infrastructure in light of the current scenario.
We have run a comparative analysis on two Zacks Utility – Water Supply companies — Consolidated Water Co. Ltd. CWCO and SJW Group SJW — to decide which one is a better pick for your portfolio.
Both the companies carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Consolidated Water has a market capitalization of $462.7 million, while SJW Group has $2 billion.
Growth Projections
The Zacks Consensus Estimate for CWCO’s 2023 earnings is pinned at $1.43 per share on revenues of $144.13 million. This implies year-over-year bottom-line increase of 164.8% and top-line growth of 53.2%.
The consensus mark for SJW’s 2023 earnings is pegged at $2.47 per share on revenues of $645.47 million. This indicates year-over-year bottom-line growth of 2.1% and top-line increase of 4%.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. The current ROE for Consolidated Water and SJW Group is 8.98% and 7.89%, respectively, compared with the sector’s 6.41%.
Debt Position
The debt-to-capital ratio is a vital indicator of the financial position of a company. It shows the amount of debt used to run a business. Currently, Consolidated Water and SJW Group have a debt-to-capital of 0.16% and 58.2%, respectively, compared with the industry’s 48.22%.
The current ratio for CWCO is 3.72 and that for SJW is 0.85. The ratio, being more than one, indicates that the company has enough financial flexibility to meet its near-term debt obligations.
Dividend Yield
Utility companies generally distribute dividends and increase shareholders’ value. Currently, the dividend yield for Consolidated Water is 1.16% and that for SJW Group is 2.42% compared with the Zacks S&P 500 Composite’s average of 1.43%.
Price Performance
In the past three months, shares of CWCO have risen 36.7%, while that of SJW have fallen 12.3%. The industry declined 40% in the same time frame.
Image Source: Zacks Investment Research
Outcome
Both Consolidated Water and SJW Group are evenly matched and good picks for your portfolio. They have the potential to improve further from their current position and serve the needs of their growing customer base. However, our choice at this moment is CWCO, given its better ROE, debt position and price performance than SJW.
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Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
SJW Group (SJW) : Free Stock Analysis Report
