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Bear Of The Day: American States Water (AWR)

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American States Water (AWR - Free Report) is a Zacks Rank #5 (Strong Sell) as estimates have fallen for this stock.  Aftrer an earnings miss in early November, this stock has actually moved higher and that means the valuation has also moved higher. Let's take a deeper look at this tock in thie Bear of the Day article.

Description

American States Water Company along with its subsidiaries provides fresh water, wastewater services and electricity to its customers in the United States. The company principally works through its two major subsidiaries — Golden State Water Company (“GSWC”) and American States Utility Services (“ASUS”). American States Water Company and its subsidiaries had a total of 841 employees as of Dec 31, 2019. The company was founded in 1929.

Earnings History

The earnings history for AWR is not that great. I see two misses, one beat and one meet.  

The good news in there is that the beat was a solid one and big enough to keep the average positive over the last four quarters.

Estimate Revisions

The Zacks Rank tells us when earnings estimates are moving lower.  I see the current quarter moving higher, but the full year 2020 number is actually moving lower.  

Next quarter, which will really be the 1st quarter of 2021 as the final quarter of 2020 hasn't been reported yet, has ticked lower.

The full year 2021 number has dipped 3 cents from $2.42 to $2.39.

When estimates move lower, the Zacks Rank will also move lower.

Valuation

For a utility with little in the way of topline growth you would think the earnings multiple would be pretty reasonable.  That is not the case, with a 33x forward earnings mulitple and a 4.7x price to book multiple.  The price to sales is also super high at 6.2x.  

This high valuation is due in part to the stock moving higher over the last few months.  If there is a correction, Utilities are often thought of as a safe harbor, but that might not be the case for this stock.

Chart

 

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