The Zacks Utility - Water Supply industry includes companies that are involved in providing drinking water and wastewater services to industrial, commercial and residential customer classes, along with numerous military bases across the country.

A continuous and uninterrupted supply of clean potable water and reliable sewer services are essential for healthy and hygienic living. Water utilities across the United States are silently doing this critical task day in and day out to meet the increasing demand of millions of Americans.

Utility operators own storage tanks, treatment plants and desalination plants to supply uninterrupted potable water. The operators own more than 2 million miles of pipelines that are getting old. Aging infrastructure leads to accidents and leakage, resulting in the wastage of gallons of precious potable water.

Per the U.S. Environmental Protection Agency, an estimated $744 billion investment is necessary to maintain and expand drinking water and wastewater services to meet demand over the next 20 years. Investor-owned water utilities are making investments to upgrade infrastructure. Still, the fragmented water industry and limited financial capabilities of small operators are creating a bottleneck in the essential upgrade of water mains and sewer pipelines.

Given this backdrop, in this article, we present a comparative analysis of two Utility – Water Supply companies — California Water Service Group (CWT Quick QuoteCWT - Free Report) and SJW Group — to decide which stock is a better pick for your portfolio now.

CWT and SJW each currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Projections

The Zacks Consensus Estimate for California Water Service Group’s 2024 earnings per share and revenues is pegged at $2.25 and $0.88 billion, respectively. The top and bottom line estimates imply year-over-year growth of 3.2% and 17.8%, respectively.

The Zacks Consensus Estimate for SJW Group’s 2024 earnings per share and revenues is pegged at $2.77 and $0.68 billion, respectively. The top and bottom line estimates indicate year-over-year growth of 3.2% and 2.9%, respectively.

Return on Equity (ROE)

ROE is the measure of a company’s efficiency in utilizing shareholders’ funds. California Water Service Group and SJW Group’s ROE for the trailing 12 months is 3.04% and 8.53%, respectively. Both companies have underperformed the industry’s ROE of 9.35%.

Dividend Yield

Utility companies generally distribute dividends. Currently, the dividend yield of California Water Service Group is 2.14%, while the same for SJW Group is 2.38%. The average dividend yield of the industry is 2.16%.

Price Performance

In the last three months, California Water Service Group’s shares have declined 0.5% against the industry's growth of 11.5%. Shares of SJW Group have gained 6.7% in the same time frame.

Image Source: Zacks Investment Research

Debt to Capital

Debt to capital is a vital indicator of a company’s financial position. It shows how much debt is used to run the business. California Water Service Group and SJW Group have a debt to capital of 42.3% and 55.6%, respectively compared with the industry’s 45.7%.

Outcome

Both companies efficiently provide water and wastewater services to customers and are evenly matched, which makes them good picks for your portfolio. However, our choice at this moment is SJW Group, given its better return on equity level, price performance and higher dividend yield in comparison to California Water Service Group.