American States Water Company Shares
American States Water Company, along with its subsidiary companies, provides water and electricity supply services to residents, industrial facilities, and other clients in the United States.
The main business segments are water, electricity, and contracted services. The company extracts, produces, supplies, and sells water in ten districts of California, serving approximately 260,000 water consumers. It provides electricity to around 24,000 customers in the city of Big Bear and its surrounding areas in California. Additionally, the company offers services for wastewater management, water supply maintenance, renovations, and other facilities.
The company was established in 1929. The headquarters are located in San Dimas, California.
The subsidiary companies Golden State Water Company and American States Utility Services, Inc. provide water services to customers, and Golden State Water Company’s division, Bear Valley Electric Service, supplies electricity. Within its operational territory, Golden State Water Company has no direct or indirect competitors. However, it temporarily competes with other companies in new real estate development projects.
Over 90% of all revenue the company receives from water supply and contractual services.
The company competes with other service providers. American States Water Company has been paying dividends to shareholders every year since 1931. And they aim to increase dividends annually.
Finances
The company’s finances are managed by assuming the corresponding risk. All obligations amount to 187% of Equity. In order to cover Long-term debts with Net profit in 2022, it would take 5.70 years. The company’s operations require continuous capital investments. However, 1 USD invested in LTA earns only 0.59 USD EPS.
The company’s profit dynamics are growing but unstable. The average annual growth rate of EPS (Earnings Per Share) over the past 10 years was 4.11%. However, the average annual growth rate of EPS over the past 5 years was only 2.34%. The company invests exclusively within its competence framework and buys back its own shares.
The average 10-year return on Retained profit decreased to 5.90%. The average ROAE over 10 years is 12.92%. This is a good return. If the company owners wanted to sell their shares and invest in the US 10 Y bonds to achieve the same return as the company provided in 2022, they would need to sell the shares for $56 each.
Investment scoreboard:
American States Water Company Shares
The company’s shares are listed on the NYSE stock exchange. Ticker: AWR.
The average annual growth of the Book Value per Share amounted to 10%. This is a significant growth. According to the GRAPES method, the stock price reaches 78 USD, which is lower than the market price at the time of writing. This could be due to rapidly increasing interest rates, as they had a significant impact on the company’s profitability.
The standard deviation of the stock prices is equal to 15.88%. This represents high risk but is typical for this type of stock. The beta is 0.41. Stocks of this type provide a certain level of stability to an investment portfolio.
As we mentioned before, the company has been paying and increasing dividends for 92 years. And indeed, the average annual dividend growth rate over the past 10 years reaches as high as 9.16%. However, the dividend yield at the time of writing is only 1.47%. But if you acquired the shares since the announcement of the idea, your position’s dividend yield is already reaching 3.90%.
Since the beginning of the idea’s announcement, the investment has already yielded a pre-tax return of 113% or an average of 12.67% per year. However, in the future, we do not expect such returns anymore. The expected average annual growth rate of the stock can range between -8.50% and -9.80%.
Therefore, we are changing the recommendation from „Accumulate” to „Hold.”
