October 31, 2024
Top 10 Stock American Water Works Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: American Water Works – Top 10 Stock in SDG 4: Quality Education
American Water Works is listed as a top 10 stock on October 31, 2024 in the market index SDG 4 because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. While the company shows high growth, the stock price is high yet professional investor sentiment is low, which may be due to overly optimistic investor behavior, reflected in a low stock price value. Based on the Obermatt 360° View of 51 (high 51% performer), Obermatt assesses an overall buy recommendation for American Water Works on October 31, 2024.
Snapshot: Obermatt Ranks
| Country | USA |
| Industry | Water Utilities |
| Index | Low Emissions, Diversity USA, SDG 11, SDG 13, SDG 4, SDG 6, SDG 9, Water Tech, S&P 500 |
| Size class | X-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View American Water Works Buy
| 360 METRICS | October 31, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 9 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 69 |
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| SENTIMENT | ||||||||
| SENTIMENT | 21 |
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| 360° VIEW | ||||||||
| 360° VIEW | 51 |
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ANALYSIS: With an Obermatt 360° View of 51 (better than 51% compared with alternatives), overall professional sentiment and financial characteristics for the stock American Water Works are above average. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for American Water Works. The consolidated Growth Rank has a good rank of 95, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. This means that growth is higher than for 95% of competitors in the same industry. In addition, the consolidated Safety Rank has a safer rank of 69 which means that the company has a financing structure that is safer than 69% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the consolidated Value Rank has a less desirable rank of 9 which means that the share price of American Water Works is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is higher than for 91% of alternative stocks in the same industry. The consolidated Sentiment Rank also has a low rank of 21, which means that professional investors are more pessimistic about the stock than for 79% of alternative investment opportunities. ...read more
RECOMMENDATION: With a consolidated 360° View of 51, American Water Works is better positioned than 51% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, the picture is ambiguous. Growth is above-average (Growth Rank of 95), and the company is safely financed (Safety Rank of 69). However, professional market sentiment is low(Sentiment Rank of 21). The negative market view on American Water Works may be due to the high stock price (low value). A growth company like this may get too expensive at one point in time. If too many investors are desperate to board the train, they may drive stock prices above reasonable levels. It is typical for growth companies to have low value ratings, because investors are willing to pay more for companies that outperform their competitors. So the question is, how much more do you pay for the stock of American Water Works compared with alternatives? You can use the following rule of thumb: The value rank shouldn’t be lower than one hundred minus the growth rank. For example, if the growth rank is at 75, and the value rank is at 5, you should tread carefully. If the value rank is at 40, it still might be a good value if the value rank is above 60. As market sentiment is low, you should be careful with paying more than market-average for this stock and conduct further research into the company’s future growth potential. ...read more
Sentiment Strategy: Professional Market Sentiment for American Water Works negative
ANALYSIS: With an Obermatt Sentiment Rank of 21 (better than 21% compared with alternatives), overall professional sentiment and engagement for the stock American Water Works is critical, mostly below average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for American Water Works. Analyst Opinions are at a rank of 22 (worse than 78% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. But they are changing their opinions! Analyst Opinions Change has a rank of 50, which means that stock research experts are more positive in their investment recommendations in the company. In other words, they are getting more optimistic of stock investments in American Water Works. More encouragingly, the Professional Investors rank is 64, which means that professional investors hold more stock in this company than in 64% of alternative investment opportunities. Pros tend to favor investing in this company. But Market Pulse is on the lower side with a rank of 24, which means that the current professional news and professional social networks are on the negative side when discussing this company (more negative news than for 76% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 21 (less encouraging than 79% compared with investment alternatives), American Water Works has a reputation among professional investors that is far below that of its competitors. The sentiment signals are mixed for American Water Works. While analysts and the news channels are negative, there is a change in what analysts think. Above-average institutional investors in this company support them. Sentiment signals remain mixed with analysts and news channels pessimistic, though improving, and professional investors above average. ...read more
Value Strategy: American Water Works Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 9 (worse than 91% compared with alternatives), American Water Works shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with all four indicators below average for American Water Works. Price-to-Sales is 4 which means that the stock price compared with what market professionals expect for future profits is higher than 96% of comparable companies, indicating a low value concerning American Water Works's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Price-to-Book Rank of 27, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of American Water Works. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 21 and Dividend Yield, which is lower than 83% of comparable companies, also make the stock more expensive compared with investment alternatives. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 9, is a sell recommendation based on American Water Works's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for American Water Works? One reason may be that the company is simply too popular. If enough people want a particular stock, its price can exceed reasonable levels. This is often the case for companies offering new and exciting products and everybody wants a piece of the action. Should you pay a lot for a hot stock such as American Water Works? It's risky, and even if the stock price continues to grow because of popular demand, it may return to more typical lower levels later. And that return can be sudden and quick, making it impossible for retail investors to exit on time. Sometimes, high prices are deserved. This is the case when it is justified to believe that the company will dominate a market with high profit margins. It has happened in the past for many technology companies and indeed for commercially successful pharmaceutical discoveries. Sometimes they last, sometimes, they get eaten alive. American Water Works may be such a type of stock. That would mean, retail investors should be careful, only considering investing a small part of their wealth in this exciting category and always being ready to lose more than half, if not all of the investment. ...read more
Growth Strategy: American Water Works Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 95 (better than 95% compared with alternatives) for 2024, American Water Works shows one of the highest growth dynamics in its industry. Investors also speak of high momentum. The Growth Rank is based on consolidating four value indicators, with all but one indicator above average for American Water Works. Sales Growth has a value of 70 which means that currently professionals expect the company to grow more than 70% of its competitors. Profit Growth with a value of 73 and Capital Growth with a rank of 92 means that currently, professionals expect the company to grow both profits and invested capital more than of its competitors. But Stock Returns has only a rank of 31, which means that stock returns have recently been below 69% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 95, is a buy recommendation for growth and momentum investors. American Water Works has only one below-average growth indicator, the stock returns. This is probably the least reliable growth indicator, because it measures company and investor expectations at the same time. The three other growth indicators, which are all positive for American Water Works, are more reliable measures of growth momentum. For this reason, the company seems to be on a good trajectory, unless you think the current period is not representative, because of unique events that will not be repeated in the future. ...read more
Safety Strategy: American Water Works Debt Financing Safety above-average
| SAFETY METRICS | October 31, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 56 |
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| REFINANCING | ||||||||
| REFINANCING | 51 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 74 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 69 |
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ANALYSIS: With an Obermatt Safety Rank of 69 (better than 69% compared with alternatives), the company American Water Works has financing practices on the safer side, which mean that their overall debt burden is lower than average. This doesn't mean that the business of American Water Works is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, where all three are above average for American Water Works. Leverage is at 56, meaning the company has a below-average debt-to-equity ratio. It has less debt than 56% of its competitors. Refinancing is at a rank of 51, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 51% of its competitors. Finally, Liquidity is also good at a rank of 74, which means that the company generates more profit to service its debt than 74% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 69 (better than 69% compared with alternatives), American Water Works has a financing structure that is safer than that of its competitors. These three positive financing indicators signal that the company is less likely to default on its debt obligations. However, it also means that its shareholder returns will be more modest if things go well. A low safety means fewer troubles in downtimes and less upside in good times. ...read more
Combined financial peformance: American Water Works Top Financial Performance
| COMBINED PERFORMANCE | October 31, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 9 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 74 |
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| COMBINED | ||||||||
| COMBINED | 79 |
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ANALYSIS: With an Obermatt Combined Rank of 79 (better than 79% compared with investment alternatives), American Water Works (Water Utilities, USA) shares have much better financial characteristics than comparable stocks. Shares of American Water Works are low in value (priced high) with a consolidated Value Rank of 9 (worse than 91% of alternatives). But they show above-average growth (Growth Rank of 95) and are safely financed (Safety Rank of 69, which means below-average debt burdens). ...read more
RECOMMENDATION: A Combined Rank of 79, is a strong buy recommendation based on American Water Works's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company American Water Works exhibits low value (Obermatt Value Rank of 9), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 95). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 69) are a double-edged sword: if the company continues growing, low debt limits shareholder returns. But if the company increases its debt, it will also increase risk. In other words, this is an investment on the safer side, despite the above-average price (low value). ...read more
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