GWRS or SJW: Which Water Utility Stock Should You Invest in?
A continuous, uninterrupted supply of clean potable water and reliable sewer services are essential for healthy and hygienic living. Water utilities are silently doing this important task day in and day out to meet millions of Americans’ increasing demand for potable water. Utility operators own storage tanks, treatment plants and desalination plants to supply uninterrupted potable water across customer classes.
Utilities also own nearly 2.2 million miles of pipelines that are getting old. They continuously replace old pipelines and add new ones to expand operations. However, a huge investment is required for this. Per the U.S. Environmental Protection Agency, an estimated $744 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years.
However, the highly fragmented industry creates operational challenges in meeting the requirement for replacement and expanding the aging water and wastewater infrastructure. Per the American Society of Civil Engineers, due to the delay in pipeline repairs and maintenance, 6 billion gallons of treated water is lost every day in the United States.
Amid such a backdrop, we run a comparative analysis on two stocks from the Utility - Water Supply industry - Global Water Resources GWRS and SJW Group SJW - to decide which is a better pick for your portfolio now.
Each stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Global Water Resources has a market capitalization of $286.2 million, while SJW Group has $2.3 billion.
Growth Projections
The Zacks Consensus Estimate for Global Water Resources’ 2023 earnings per share and revenues is pegged at 31 cents and $51.3 million, respectively. The top and bottom-line projections imply year-over-year growth of 14.7% and 29.2%, respectively.
The Zacks Consensus Estimate for SJW Group’s 2023 earnings per share and revenues is pegged at $2.5 and $642.8 million, respectively. The top and bottom-line projections indicate year-over-year growth of 3.6% and 2.1%, respectively.
Return on Equity (ROE)
ROE is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12 months for Global Water Resources and SJW Group is 13.1% and 7.6%, respectively. Global Water Resources has outperformed the industry’s ROE of 9.1%.
Dividend Yield
Utility companies generally distribute dividends. Currently, the dividend yield of Global Water Resources is 2.5%, while the same for SJW Group is 2.1%. The average dividend yield of the industry is 2%.
Debt to Capital
Debt to capital is a good indicator of a company’s financial position. The indicator shows how much debt is used to run the business. Global Water Resources and SJW Group have a debt to capital of 70.8% and 56.9%, respectively, compared with the industry’s 45.1%.
Price Performance
In the past month, shares of Global Water Resources have gained 4% against the SJW Group and the Zacks Utility – Water Supply industry’s decline of 4.4% and 5.2%, respectively.
Image Source: Zacks Investment Research
Outcome
Both companies efficiently provide water and wastewater services to their customers. They are evenly matched and are good picks for your portfolio. But our choice at this moment is Global Water Resources, given its better earnings projections, healthier return on equity level and higher dividend yield compared with SJW Group.
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SJW Group (SJW) : Free Stock Analysis Report
Global Water Resources, Inc. (GWRS) : Free Stock Analysis Report
