While investors have recently started targeting gold for good reason, those seeking exposure to commodities should target the most valuable one in the world, which segues nicely into the top water stocks for June 2023. While water covers most of the Earth’s surface, only about 3% of it is freshwater. And only 1.3% is actually drinkable.
Unsurprisingly, water shortages have sparked tensions across the world. Without getting too macabre, the situation will almost certainly worsen. Like it or not, because water has no substitute, societies in many ways have little choice but to compete for the resource. Fundamentally, the permanence of the underlying narrative helps drive high-return water stocks to buy to new peaks.
To be sure, no one knows what operating system will dominate the computers of tomorrow or which electric vehicle brand consumers will desire the most. However, everyone knows that water will still be the most valuable commodity. Given this reality, below are the best water industry investments to consider.
Consolidated Water (CWCO)
Headquartered in the Cayman Islands, Consolidated Water (NASDAQ:CWCO) develops and operates advanced water supply and treatment plants and water distribution systems. Primarily, the company operates water production facilities in the Bahamas, the British Virgin Islands, and its home market. As well, it operates water treatment facilities in the U.S. Given its comprehensive footprint, CWCO ranks among the top water stocks for June 2023.
Notably, CWCO gained almost 36% since the beginning of this year. For context, the U.S. benchmark S&P 500 index gained a little over 10% during the same period. Financially, Consolidated’s biggest strength centers on its balance sheet. With a cash-to-debt ratio of 22.23 times (beating out 89% of competitors in the regulated utility sector), the enterprise features high stability. Thus, it may be one of the best water industry investments.
Notably, Consolidated’s return on asset clocks in at 4.23%. That’s better than 68.21% of rival utilities. Also, its consistently profitable, providing encouragement for those seeking high-return water stocks to buy. Finally, analysts peg CWCO as a moderate buy. Their average price target lands at $24, implying nearly 22% upside potential.
Essential Utilities (WTRG)
Founded in 1968, Essential Utilities (NYSE:WTRG) is one of the largest publicly traded water, wastewater, and natural gas providers in the U.S., serving approximately 5 million people across 10 states under the Aqua and Peoples brands. Per its public profile, Essential is committed to excellence in proactive infrastructure investment, regulatory expertise, operational efficiency, and environmental stewardship. To be sure, WTRG wins in the narrative department of the top water stocks for June 2023.
However, investors admittedly need to be careful here because it’s one of the riskiest ideas. Conspicuously, investment resource Gurufocus warns that WTRG could be a possible value trap. To add some credence to the concerns, Essential’s Altman Z-Score sits at 1.04, indicating distress. However, it’s also important to realize that utilities generally print shoddy financial stats.
What’s prudent to recognize is the underlying natural monopoly. This factor contributes to Essential posting a monstrous three-year revenue growth rate of 28.3%. Also, its EBITDA growth rate during the same period equally impresses at 18.9%. Fundamentally, then, WTRG represents one of the top-performing water stocks.
Lastly, analysts peg WTRG as a moderate buy. Their average price target clocks in at $50.50, implying over 26% upside potential.
Primo Water (PRMW)
A leading pure-play water solutions provider in North America, Primo Water (NYSE:PRMW) operates largely under a recurring razor/razorblade revenue model, per its corporate profile. The razor in Primo’s revenue model is its industry-leading line-up of sleek and innovative water dispensers, which are sold through major retailers and online. As for the razor blade, Primo offers various hydration and water filtration solutions.
Despite the robust business footprint, PRMW represents a high-risk, high-reward venture among top water stocks for June 2023. Since the January opener, shares stumbled over 16%. Some of the weakness in the charts centers on less-than-desirable stats on the balance sheet. As well, Primo appears overvalued against trailing earnings.
However, it also makes a case for the best water companies to buy in June because of its three-year EBITDA growth rate of 9.1%. This stat beats out 65.22% of sector rivals. Also, Primo enjoys a very strong gross margin of 59.16%, possibly making it a promising enterprise. In closing, analysts peg PRMW as a moderate buy. Their average price target stands at $17.50, implying over 35% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.