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CWCO or GWRS: Which Water Utility Stock is a Better Pick?

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The U.S. water infrastructure is quite old, and massive investment is required to fix the existing water and wastewater systems. Some of the water mains are nearly a century old and require immediate replacement. Per American Water Works Association, the U.S. water systems need about $1 trillion investment over the next two decades for its aging infrastructure.

All the regulated water utilities are investing to strengthen operation and recoup the same through rate hikes. Consolidation is the need of the hour in the fragmented U.S. water utility space. U.S. water utility operation is highly fragmented and there are a large number of small operators serving only a few hundred customers. It becomes very difficult for small operators or municipalities to make large investments to upgrade and expand their water and wastewater infrastructure.

However, it is easier for large companies to make arrangement for funds to carry out these major overhauls. Consolidation would therefore drive the necessary infrastructure overhauls that have become imperative for the industry at large.

Against this backdrop, in this article we run a comparative analysis on two water utilities — Consolidated Water Co. (CWCO - Free Report) and Global Water Resources, Inc (GWRS - Free Report) — to ascertain which one performed better and makes for a suitable investment option right now.

Earnings & Surprise Trend

Global Water Resources’ second-quarter 2018 adjusted earnings beat the Zacks Consensus Estimate by 83.33%. The company surpassed the Zacks Consensus Estimate in all the trailing four quarters, with the average being 83.33%.

Consolidated Water’s second-quarter 2018 operating earnings lagged the Zacks Consensus Estimate by 6.67%. The company’s average negative surprise in the trailing four trailing quarters is 7.51%.

Debt/Capital

Consolidated Water and Global Water Resources’ debt/capital ratio stands at 0.00% and 88.0% compared with its industry’s average of 39.90% and Zacks S&P 500 composite’s 41.72%.

Estimates Movement

In the past 30 days, the Zacks Consensus Estimate for Global Water Resources’ 2018 earnings has moved up 11.8% to 19 cents, reflecting year-over-year growth of 58.3%.

The Zacks Consensus Estimate for Consolidated Water Co.’s 2018 earnings remained unchanged at 60 cents in the past 30 days, reflecting year-over-year growth of 22.5%.

Zacks Rank

Consolidated Water Co. Ltd. currently carries a Zacks Rank #2 (Buy). The company has a market capitalization of around $204.3 million.

You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Global Water Resources, Inc. currently holds a Zacks Rank #3 (Hold). It has a market capitalization of $218.6 million.

Price Movement

Shares of Consolidated Water Co. and Global Water Resources have gained 10.8% and 5.7%, respectively, compared with the industry’s growth of 2.2% in the past 12 months. Hence, the price movement of Consolidated Water is better than that of Global Water Resources.



The Verdict

Consolidated Water Co. and Global Water Resources are comparable operators in the U.S. water industry based on their current market capitalization.  

While Global Water Resources has an edge in some the above-mentioned parameters, but our verdict goes to Consolidated Water Co., given its better rank and no long term debts in its balance sheet.

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