Water stocks don’t really need much in terms of fundamental justification. It’s the one resource that is easily the most precious. Sure, you can talk about gold or some other important asset that features significant industrial or technological implications: lithium comes readily to mind. However, as far as I know, you can’t eat lithium.
On a less-existential note, investing in water stocks isn’t just about the underlying core human necessity. Because of the underlying utility and scarcity, companies spend billions of dollars managing it. From efficiency protocols to wastewater management, the industry is one of the most heavily regulated. And because of its criticality, the narrative enjoys permanent relevance.
And yes, one can make the argument that it’s a boring industry. However, the global water and wastewater treatment market size may continue to expand at a compound annual growth rate of 7.5% from 2024 to 2032, culminating in a valuation of $617.81 billion. On that note, below are water stocks for investors to consider.
American Water Works (AWK)
One of the top-tier names among water stocks, American Water Works (NYSE:AWK) provides water and wastewater services in the U.S. Per its public profile, the company delivers the aforementioned solutions to approximately 1,700 communities in 14 states. In total, American Water services about 3.5 million active customers, which cover the full spectrum: residential, commercial, industrial and governmental, among other categories.
Financially, the benefit for investors in considering AWK stock centers on consistency. In the past four quarters, the company posted an average earnings per share of $1.23. This figure beat the collective consensus view of $1.19, translating to an average earnings surprise of 2.85%. Also, in the company’s most recent quarter, the sales growth rate (year-over-year) clocked in at 7.8%.
These aren’t exciting stats but they get the job done. For fiscal 2024, analysts project EPS to hit $5.23, up almost 7% from the prior year. On the top line, sales may rise to $4.48 billion, up 5.9% from the prior year’s tally of $4.23 billion. Overall, it’s one of water stocks you can depend on.
Artesian Resources (ARTNA)
Another player in the regulated water utilities space, Artesian Resources (NASDAQ:ARTNA) through its subsidiaries provides water, wastewater and other related services in Delaware, Maryland and Pennsylvania. Artesian too serves the full spectrum of customers: residential, commercial, industrial, governmental and other categories. Fundamentally, the company could benefit from geographic advantages as younger people migrate away from metropolitan areas for cost of living reasons.
As with American Water Works, Artesian benefits from financial consistency. In the past year since the first quarter of 2024, the utility posted an average EPS of 43 cents. This figure beat the collective consensus view of 40 cents, yielding an earnings surprise of 8.28%. In Q1, the company managed to generate YOY growth of 9.1%.
For fiscal 2024, experts believe that EPS may rise to $1.99. If so, that would imply a lift of over 19%. On the top line, sales might ping at $105 million, up 6.2% from last year’s haul of $98.86 million. Also, Artesian offers a decent forward annual dividend of 3.01%, making it one of the top water stocks.
Middlesex Water (MSEX)
Based in Iselin, New Jersey, Middlesex Water (NASDAQ:MSEX) is a water utility that’s similar in size to Artesian Resources. Owning and regulating water and wastewater systems, the company serves residential, commercial, industrial and fire-protection customers in New Jersey and Delaware. As a smaller entity, it may offer a higher ceiling. Notably, in the past month, MSEX gained over 26% of equity value.
Although the recent growth in the charts has been impressive, Middlesex is riskier. In the past year since Q1, the utility posted an average EPS of 51 cents. However, the collective consensus view called for 61 cents. Therefore, the business incurred a negative earnings surprise of 13.53%. It also trades at a much higher sales multiple at 7.02X.
Despite some concerns, Middlesex has grown its top line by 6.2% in the most recent quarter. For fiscal 2024, sales may rise to $187.2 million, up 12.6% from last year’s print of $166.27 million. Also, EPS may soar 30.11% to $2.29. Add in a forward yield of nearly 2% and you have an intriguing idea for water stocks to speculate on.
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.
