SPECIAL REPORT The Top 7 Stocks for 2024

3 Water Stocks Quenching the Thirst for Growth

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  • Overwhelming relevance should lift these water stocks to buy for growth.
  • Pentair (PNR): Leading water treatment company focused on residential, commercial, and industrial solutions, demonstrating positive momentum.
  • Xylem (XYL): Noteworthy water technology provider with consistent profitability, making a recent strong comeback.
  • Essential Utilities (WTRG): Utility sector player with enduring relevance and a potential de-risked profile, earning a unanimous strong buy rating from analysts.
water stocks - 3 Water Stocks Quenching the Thirst for Growth

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Amid the geopolitical tensions and flashpoints that we’re witnessing, investors may want to take that as a clue to consider the best water stocks. Currently, conflicts erupt for land, crude oil, and even flat-out ego. However, as Sky News suggested, the next major military outbreak could concern access to water.

It’s not a novel concept. Back in January 2010, NPR warned that nations could come to blows for this most precious resource that we generally take for granted. However, looking at the market performance for this ecosystem, it appears not many on Wall Street are appropriately valuing it. Still, that might open the door for water stocks to buy for growth.

To be sure, this sector will require patience as it’s not the sexiest arena. Nevertheless, the relevance is undeniable. With the resource being finite, demand should theoretically skyrocket eventually. On that note, below are the top water stocks to consider.

Pentair (PNR)

In this photo illustration the Pentair (PNR) logo seen displayed on a smartphone
Source: rafapress / Shutterstock.com

One of the top water stocks to buy for growth, Pentair (NYSE:PNR) is a water treatment company incorporated in Ireland with tax residency in the U.K., per its public profile. Presently, Pentair focuses on residential and commercial water solutions, along with industrial water management and other subsegments. However, PNR raises eyebrows (in a positive sense) for its market performance.

Since the beginning of the year, shares moved up nearly 39%. Even better, the enthusiasm for one of the best water stocks doesn’t just center on technical speculation. Late last month, management disclosed results for the third quarter, which saw adjusted earnings per share hit 94 cents. That was above the company’s guidance of between 84 cents to 89 cents.

In fairness, net sales declined 4% on a year-over-year basis to $1.01 billion. However, this tally still managed to beat the consensus analyst view of $991 million. As well, PNR carries a moderate buy rating with a $72.64 average price target.

Xylem (XYL)

xylem app
Source: IgorGolovniov / Shutterstock.com

A water technology provider, Xylem (NYSE:XYL) features products and services in two key areas: water infrastructure and applied water. The former category deals with clean water delivery, wastewater transport and treatment and dewatering and analytical instrumentation. For the latter category, the segment provides resident and commercial building services and industrial and agricultural applications.

While XYL makes a solid case on paper for top water stocks to buy for growth, Wall Street hasn’t seen it that way throughout most of this year. Since the January opener, XYL dropped almost 8% of equity value. However, it’s making a strong comeback late. In the trailing one-month period, XYL swung up over 14%. At least some of the upswing appears related to prior short-covering speculation.

Moving forward, investors should be able to take confidence in Xylem’s consistent profitability. Also, it features above-average metrics for operating and net margins. Lastly, analysts view XYL as a consensus strong buy with a $121 average price target.

Essential Utilities (WTRG)

A photo of water being poured into a glass that's sitting on a table.
Source: HQuality/ShutterStock.com

As an enterprise within the utility sector, Essential Utilities (NYSE:WTRG) might not immediately strike investors as one of the best water stocks to buy for growth. After all, a utility generally benefits from a predictable business model that simultaneously enjoys a captive audience. In other words, no matter what happens to the economy, you’ve got to pay your bills.

Still, betting on WTRG will not be a walk in the park. Since the beginning of the year, shares lost more than 27% of equity value. What’s eyebrow raising (and not in a good way) is that WTRG gained only 2% in the trailing five years. However, this framework just might make it one of the tempting water stocks for speculators. Basically, it combines fundamental relevance with a possibly de-risked profile.

While Essential Utilities is overvalued relative to earnings and sales, the company continues to steadily expand the bottom line. That might carry a premium at the current juncture and analysts agree, rating it a unanimous strong buy.

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.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


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