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Reasons to Add American States Water (AWR) in Your Portfolio

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American States Water Company’s (AWR - Free Report) expanding customer base, significant water rights in its service territories, regular dividend hikes and strong credit rating are tailwinds for the company.

Let’s focus on the factors that make this Utility - Water Supply company  an attractive investment option.

Zacks Rank & Price Performance

American States Water carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of the company have rallied 5.6% in the past 12 months against the industry’s decline of 5%.

Growth Projections

The Zacks Consensus Estimate for 2020 earnings is pegged at $2.23 per share on revenues of $477 million. The bottom-line figure suggests a year-over-year increase of 4.69%. The same for the top line calls for a 0.66% rise on a year-on-year basis.

The Zacks Consensus Estimate for 2021 earnings is pegged at $2.40 per share on revenues of $496 million. The bottom-line figure suggests a 7.62% year-over-year increase. The same for the top line calls for a 3.98% rise on a year-on-year basis.

Strong Financial Position

American States Water Company's long-term debt-to-capital is 44.87% compared with the Utilities sector’s 46.88%. Its times interest earned ratio improved on a sequential basis. It came in at 5.6 at the end of first-quarter 2020, up from 5.4 at the end of fourth-quarter 2019.

The strong ratio indicates that the company will be able to meet debt obligations in the near future. At a time when every entity is looking forward to preserve liquidity amid uncertainty related to the COVID-19 outbreak, this improving ratio is reassuring for investors.

Favourable New Rates & Systematic Investments

The California Public Utilities Commission ("CPUC") approved GSWC's (Subsidiary of  American States Water Company) water general rate case, effective from Jan 1. The hike is expected to generate an additional $10.4 million in gross margin for 2020 compared with gross margin of 2019.

New rates will help the company to recover the amount invested to upgrade and improve its infrastructure and continue its infrastructure upgrade initiatives. GSWC invested $23.2 million in company-funded capital projects during the first quarter of 2020 and expects to invest $115-$130 million in 2020 unless the company needs to revise the expenditures due to outbreak of COVID-19.

Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12 months for American States Water is 13.44% compared with the industry’s 7.89%.

Other Key Picks

Some other top-ranked stocks from the same sector are American Water Works Company Inc (AWK - Free Report) , Vistra Energy Corp (VST - Free Report) and NextEra Energy, Inc. (NEE - Free Report) . All the three stocks carry a Zacks Rank #2.

Long-term earnings growth of American Water Works, Vistra Energy and NextEra Energy is pegged at 8.10%, 11.90% and 7.70 %, respectively.

American Water Works, Vistra Energy and NextEra Energy have a trailing four-quarter positive earnings surprise of 1.55%, 5.59% and 2.39%, on average, respectively.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.

Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.

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