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.
A continuous and uninterrupted supply of clean potable water and reliable sewer services are essential for healthy and hygienic living. Water utilities across the United States are silently doing this critical task day in and day out to meet the increasing demand of millions of Americans.
Utility operators own storage tanks, treatment plants and desalination plants to supply uninterrupted potable water. The operators own more than 2 million miles of pipelines that are getting old.
The water and wastewater infrastructure is aging and is gradually nearing the end of its effective service life. Per the U.S. Environmental Protection Agency, an estimated $744 billion investment is necessary to maintain and expand drinking water and wastewater services to meet demand over the next 20 years.
Given the current situation, investor-owned water utilities and the government are funding water and wastewater infrastructure projects to upgrade the infrastructure.
In this article, we run a comparative analysis on two Utility – Water Supply companies — The York Water Company YORW and Global Water Resources, Inc. GWRS — to decide which stock is a better pick for your portfolio now.
Both stocks currently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for The York Water Company’s 2023 earnings per share and revenues is pegged at $2.71 and $0.5 billion, respectively. The top and bottom lines reflect year-over-year growth of 13.6% and 16.6%, respectively.
The Zacks Consensus Estimate for Global Water Resources’ 2023 earnings per share and revenues is pegged at 29 cents and $0.05 billion, respectively. The top and bottom lines reflect year-over-year growth of 20.8% and 15.9%, respectively.
Return on Equity (ROE)
ROE is the measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12 months for The York Water Company and Global Water Resources is 10.8% and 12.6%, respectively. Both companies have outperformed the industry’s ROE of 9.3%.
Utility companies generally distribute dividends. Currently, the dividend yield of The York Water Company is 2.18%, while the same for Global Water Resources is 2.63%. The average dividend yield of the industry is 2.17%.
In the past month, The York Water Company’s shares have gained 5.5% compared with the industry's growth of 8.5%. Shares of Global Water Resources have gained 18.2% in the same time frame.
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Debt to Capital
Debt to capital is a vital indicator of a company’s financial position. It shows how much debt is used to run the business. The York Water Company and Global Water Resources have a debt to capital of 43.5% and 68.1%, respectively compared with the industry’s 45.7%.
Both companies efficiently provide water and wastewater services to customers. Both are evenly matched and are good picks for your portfolio. But our choice at this moment is Global Water Resources, given its better earnings estimate revision, return on equity level, price performance and higher dividend yield in comparison to The York Water Company.
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