On Wednesday, BofA Securities began covering American States Water (NYSE:AWR) with a Neutral rating and set a price target of $85.00. The firm's analyst cited the company's high-quality utility profile, strong balance sheet, and history of delivering returns that exceed the regulated average return on equity (ROE).
With a market capitalization of $3.12 billion and a remarkable 32-year streak of consecutive dividend raises, as reported by InvestingPro, American States Water's consistent growth was also highlighted as a key factor in the coverage initiation.
The analyst noted that American States Water is trading at a 12% premium compared to its water utility peers and a 44% premium over electric and gas utilities. Trading at a P/E ratio of 27.8x and currently near its 52-week high of $87.50, the stock appears overvalued according to InvestingPro's Fair Value analysis.
The assessment suggests that while the company's quality is high, it is already reflected in the current stock price. The firm expressed a general preference for value in the water sector, anticipating further multiple compression relative to electric utilities.
This new price target implies a potential price return of 3.7% for American States Water's shares. The analyst's remarks underscore the balance between the company's strong performance metrics and the market's current valuation of its stock.
Investors may take this neutral stance as an indicator that while American States Water is a solid company, its shares might be fully valued at the moment. The price target is set with consideration of the company's premium positioning in the market relative to its peers.
The coverage initiation and price target announcement for American States Water by BofA Securities provides investors with a new data point to consider when evaluating the company's stock. The target is based on the firm's analysis of the company's financial health and market position.
In other recent news, American States Water Company (NYSE:AWR) reported robust growth in its third quarter of 2024.
The company's earnings per share (EPS) increased to $0.95, up from $0.85 in the same quarter last year, primarily driven by rate increases in the Water segment and investment gains. The company's capital expenditures for the year are projected to fall between $210 million and $230 million, reflecting significant investments in infrastructure and new construction projects.
Furthermore, Golden State Water's settlement with the California Public Utilities Commission has authorized $573.1 million in capital investments for the years 2025-2027. In addition, Bear Valley Electric's settlement proposes $75.6 million in capital investments for the period 2023-2026. These recent developments are expected to positively impact the company's revenue, which has already increased by $10 million year-over-year.
Despite facing challenges from rising operating expenses and interest costs, the company maintains strong credit ratings, with American States Water rated A Stable and Golden State Water rated A+ Stable by S&P. The company's ongoing investments, regulatory settlements, and solid financial performance suggest a stable path for future growth.
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