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ATRNA or SJW: Which Utility Water Supply Stock to Hold Now?

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A continuous uninterrupted supply of clean potable water and reliable sewer services are essential for healthy and hygienic living. Per the Environmental Protection Agency (EPA), at present, more than 51,000 community water systems and 16,000 community wastewater systems in the United States are providing water solutions to customers.

Since the U.S. water utility industry is highly fragmented, upgrading the aging assets to provide quality services is the need of the hour. Hence, utilities continuously replace old pipelines and add new ones to expand operations.

Utility operators own storage tanks, treatment plants and desalination plants to supply uninterrupted potable water across customer classes. Despite the ample presence of water worldwide, less than 1% of the total water volume is fit for human use. However, due to the delay in essential pipeline repairs and maintenance, 2.1 trillion gallons of treated water are lost every year in the United States.

Upgrade and maintenance of old pipelines, along with the proper usage of potable water and water-efficient appliances, can help in stopping the wastage of this priceless resource. However, huge investments are required to upgrade and maintain the aging U.S. water infrastructure. Per the EPA, an estimated $744 billion investment is necessary to maintain and expand the drinking water and wastewater service to meet demand over the next 20 years.

In addition, the U.S. government is also planning to invest in upgrading the water infrastructure. The American Jobs Plan has provisions for $111 billion in water and wastewater infrastructure upgrades.

Amid such a backdrop, we run a comparative analysis on two stocks from the Utility - Water Supply industry — Artesian Resources Corp. (ARTNA - Free Report) and SJW Group (SJW - Free Report) — to decide which stock is a better pick for your portfolio now.

Both the stocks currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1  Rank (Strong Buy) stocks here.

Artesian Resources has a market capitalization of $446.3 million, while the same for SJW Group is $2,030 million.

Growth Projections

The Zacks Consensus Estimate for Artesian Resources’2022 earnings is pegged at $1.9 per share on revenues of $93 million. The bottom line suggests a year-over-year increase of 6.2%.

The Zacks Consensus Estimate for SJW Group’s fiscal 2022 earnings is pegged at $2.39 per share on revenues of $600.9 million. The bottom line suggests a year-over-year increase of 17.73%.

Price Performance

In the past six months, ARTNA shares have rallied 19.8% against the industry's 1.5% decline. Shares of SJW have rallied 2% in the same period.

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Debt to Capital

Debt to capital is a good indicator of the financial position of a company. The indicator shows how much debt is used to run the business. Artesian Resources and SJW Group have a debt to capital of 44.9% and 60.7%, respectively, compared with the industry’s average debt-to-capital level of 47.16%.

Dividend Yield

Utility companies generally distribute dividends. Currently, the dividend yield for Artesian Resources and SJW Groupis 2.3% and 2.1%, respectively, compared with the industry average of 1.75%.

Return on Equity

Return on Equity (ROE) is a measure of a company’s efficiency in utilizing shareholders’ funds. ROE for the trailing 12 months for Artesian Resources and SJW Group is 9.7% and 5.3%, respectively. Both stocks have underperformed the industry’s ROE of 9.9%.

Outcome

Though both the companies are efficiently providing services to customers, Artesian Resources, with its efficient debt management and a higher dividend yield, is a better stock to add to your portfolio.


In-Depth Zacks Research for the Tickers Above


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Artesian Resources Corporation (ARTNA) - free report >>

SJW Group (SJW) - free report >>