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This Trio of Good Performers May Be Overvalued

Shareholders of Eversource Energy (NYSE:ES), CMS Energy Corp (NYSE:CMS) and The York Water Co (NASDAQ:YORW) have seen their holdings perform strongly over the past several years, outperforming even the S&P 500 index, which is the benchmark for U.S. markets.

Wall Street sell-side analysts recommend positive ratings of hold to overweight for them.

Eversource Energy


Shares of Eversource Energy have climbed 7.8% over the past 12 months, 29.3% over the past three years and 50% over the past five years through April 1, outperforming the S&P 500 by 21.6%, 24.7% and 30.5%, respectively.

The Springfield, Massachusetts-based distributor of electricity, natural gas and water to customers in Connecticut, Massachusetts and New Hampshire has also paid quarterly dividends over the period observed. The most recent payment of 56.8 cents per share was made on March 31, generating a 2.85% dividend yield as of April 1.

Eversource Energy has an operating margin of 21.46% versus the industry median of 13.75% and a net margin of 10.66% versus the industry median of 7.95%. Also, the company has a return on equity of 7.6% versus the industry median of 8.67%.

The stock traded at a price of $75.99 per share at close on April 1 for a market cap of $25.55 billion. The stock has a price-earnings ratio of 27.04, a price-sales ratio of 2.88 and a price-book ratio of 1.97. These ratios, together with the below Peter Lynch chart, indicate that the current share price is not the cheapest.

Wall Street recommends a hold rating for this stock with an average target price of $91.06 per share.

CMS Energy Corp

Shares of CMS Energy Corp have climbed 2% over the past 12 months, 24.5% over the past three years and 58% over the past five years through April 1, outperforming the S&P 500 by 15.5%, 20% and 38.5%, respectively.

The Jackson, Michigan-based energy company has also paid quarterly dividends over the years in question. The most recent quarterly dividend of 40.8 cents per common share was paid on Feb. 28, which generates a dividend yield of 2.79% as of April 1.

CMS Energy Corp has an operating margin of 18.1% versus the industry median of 13.75% and a net margin of 9.93% compared to the industry median of 7.95%. The company has also a return on equity of 13.91% versus the industry median of 8.67%.

The stock traded at a price of $55.71 per share at close on April 1 for a market cap of $15.83 billion. The stock has a price-earnings ratio of 23.31, a price-sales ratio of 2.31 and a price-book ratio of 3.15. These ratios, along with the below Peter Lynch chart, indicate that the current share price is not cheap.

Wall Street recommends an overweight rating for this stock with an average target price of $66.40 per share.

The York Water Co

Shares of The York Water Co have climbed 15.8% over the past 12 months, 11% over the past three years and 60.3% over the past five years through April 1, outperforming the S&P 500 index by 29.6%, 6.4% and 40.8%, respectively.

The York, Pennsylvania-based purifier and distributor of drinking water has also paid quarterly dividends over the observed period. Currently, the company pays a quarterly dividend of 18 cents per common share. The next payment is scheduled to be sent out to shareholders on April 15, which generates a forward dividend yield of 1.86% as of April 1.

The York Water Co has an operating margin of 46.12% versus the industry median of 13.75 and a net margin of 27.92% versus the industry median of 7.95%. Also, the stock has a return on equity of 11.1% versus the industry median of 8.67%.

The stock closed at a price of $38.90 per share on April 1 for a market capitalization of $506.35 million. The stock has a price-earnings ratio of 35.05, a price-sales ratio of 9.78 and a price-book ratio of 3.77. These ratios, together with the below Peter Lynch chart, suggest that the share price is not at its cheapest.

Wall Street recommends an overweight rating for this stock with an average target price of $53 per share.

Disclosure: I have no positions in any securities mentioned.

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This article first appeared on GuruFocus.