American Water (AWK) AI Stock Analysis

• Market Cap: $27.30B
• Dividend Yield: 2.33%
• Average Volume (3M): 1.13M
• Price to Earnings (P/E): 24.3
• Beta (1Y): 0.05
• Revenue Growth: 13.37%
• EPS Growth: 13.29%
• Country: US
• Employees: 6,700
• Sector: Utilities
• Sector Strength: 65
• Industry: Regulated Water
• EPS (TTM): 1.48
• Shares Outstanding: 202,140,820
• 10 Day Avg. Volume: 1,167,995
• 30 Day Avg. Volume: 1,134,375
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.54
• Enterprise Value/Revenue: 8.50
• Enterprise Value/Gross Profit: 14.13
• Enterprise Value/Ebitda: 14.95
• 1Y Price Target: $143.71
• Price Target Upside: 5.35% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 7

• Rating: 66 Neutral
• Price Target: $151.00 ▲(10.70% Upside)

American Water's overall stock score is driven by its strong earnings growth and strategic acquisitions, as highlighted in the earnings call. However, high leverage, negative free cash flow, and a bearish technical outlook weigh on the score. The company's valuation is relatively high, but the dividend yield offers some compensation. Recent corporate governance improvements are a positive factor.

Positive Factors

Revenue Growth

Consistent revenue growth through rate increases and acquisitions indicates strong market positioning and ability to expand customer base.

Capital Investments

Significant capital investments support infrastructure improvements and long-term growth, enhancing service reliability and operational capacity.

Board Expansion

Expanding the board with experienced directors strengthens governance and operational oversight, potentially improving strategic decision-making.

Negative Factors

High Leverage

High leverage can increase financial risk and limit flexibility, potentially impacting the company's ability to invest in growth opportunities.

Negative Free Cash Flow

Negative free cash flow indicates challenges in generating cash, which could affect the company's ability to fund operations and growth initiatives.

Decreased EBIT Margin

A declining EBIT margin suggests pressure on operational efficiency, which could impact profitability and long-term financial health.

American Water Business Overview & Revenue Model

Company Description

American Water Works Company, Inc., through its subsidiaries, provides water and wastewater services in the United States. It offers water and wastewater services to approximately 1,700 communities in 14 states serving approximately 3.4 million active customers. The company serves residential customers; commercial customers, including food and beverage providers, commercial property developers and proprietors, and energy suppliers; fire service and private fire customers; industrial customers, such as large-scale manufacturers, mining, and production operations; public authorities comprising government buildings and other public sector facilities, such as schools and universities; and other utilities and community water and wastewater systems. It also provides water and wastewater services on various military installations; and undertakes contracts with municipal customers, primarily to operate and manage water and wastewater facilities, as well as offers other related services. In addition, the company operates approximately 80 surface water treatment plants; 480 groundwater treatment plants; 160 wastewater treatment plants; 52,500 miles of transmission, distribution, and collection mains and pipes; 1,100 groundwater wells; 1,700 water and wastewater pumping stations; 1,300 treated water storage facilities; and 76 dams. It serves approximately 14 million people with drinking water, wastewater, and other related services in 24 states. American Water Works Company, Inc. was founded in 1886 and is headquartered in Camden, New Jersey.

How the Company Makes Money

American Water generates revenue primarily through its regulated utility operations, which provide stable and predictable cash flows. The company earns money by charging customers for water and wastewater services, with rates determined by regulatory bodies in the states where it operates. Additionally, American Water has a significant presence in the market-based segment, which includes operations such as water system operations and maintenance for municipalities and private companies, as well as industrial water services. Key revenue streams include residential water bills, wastewater service charges, and fees from industrial and commercial contracts. The company also benefits from infrastructure investments, which allow for rate increases approved by regulators, contributing to growth in revenue. Partnerships with municipalities and private entities further enhance its earnings potential through service contracts and joint ventures in water management and infrastructure projects.

American Water Financial Statement Overview

Summary

American Water shows strong revenue growth and profitability with stable returns on equity. However, high leverage and negative free cash flow present potential risks. The company needs to address its cash flow challenges to maintain financial stability.

Income Statement

American Water shows consistent revenue growth with a TTM growth rate of 2.64%. The company maintains strong profitability with a gross profit margin of 60.14% and a net profit margin of 21.91% in the TTM. However, the EBIT margin has decreased from 40.18% in 2024 to 29.10% in the TTM, indicating some pressure on operational efficiency.

Balance Sheet

The company has a relatively high debt-to-equity ratio of 1.41 in the TTM, which is a concern for leverage. However, the return on equity remains stable at 10.34%, reflecting efficient use of equity. The equity ratio is not provided, but the overall balance sheet indicates a stable financial position.

Cash Flow

Operating cash flow remains positive, but the free cash flow is negative, with a TTM free cash flow to net income ratio of -0.51. This indicates potential challenges in generating free cash flow. The operating cash flow to net income ratio is 0.49, suggesting moderate cash flow efficiency.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	4.94B	4.68B	4.23B	3.79B	3.93B	3.78B
Gross Profit	2.97B	2.83B	2.51B	2.20B	2.15B	2.15B
EBITDA	2.81B	2.67B	2.36B	2.00B	1.91B	1.93B
Net Income	1.08B	1.05B	944.00M	820.00M	1.26B	709.00M
Balance Sheet
Total Assets	33.91B	32.83B	30.30B	27.79B	26.07B	24.77B
Cash, Cash Equivalents and Short-Term Investments	94.00M	96.00M	330.00M	85.00M	116.00M	547.00M
Total Debt	15.06B	14.11B	12.44B	12.45B	11.06B	11.02B
Total Liabilities	23.23B	22.50B	20.50B	20.09B	18.78B	18.31B
Stockholders Equity	10.68B	10.33B	9.80B	7.69B	7.30B	6.45B
Cash Flow
Free Cash Flow	-987.00M	-811.00M	-860.00M	-1.31B	-432.00M	-502.00M
Operating Cash Flow	1.95B	2.04B	1.87B	1.11B	1.44B	1.43B
Investing Cash Flow	-3.25B	-3.38B	-2.81B	-2.13B	-1.54B	-2.06B
Financing Cash Flow	1.33B	1.11B	1.19B	1.00B	-345.00M	1.12B

American Water Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 136.41
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AWK, the sentiment is Negative. The current price of 136.41 is below the 20-day moving average (MA) of 139.25, below the 50-day MA of 141.30, and below the 200-day MA of 136.67, indicating a bearish trend. The MACD of -1.83 indicates Positive momentum. The RSI at 39.92 is Neutral, neither overbought nor oversold. The STOCH value of 43.50 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AWK.

American Water Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SBS	76 Outperform	16.81B	8.64	25.94%	2.18%	30.74%	143.94%
MSEX	74 Outperform	965.15M	22.56	9.92%	2.54%	11.91%	16.88%
WTRG	69 Neutral	10.60B	16.05	9.61%	3.49%	20.70%	14.59%
CWT	69 Neutral	2.73B	19.96	8.20%	2.67%	0.62%	-24.24%
AWK	66 Neutral	$27.30B	24.31	10.40%	2.33%	13.37%	13.29%
AWR	66 Neutral	2.77B	22.05	12.82%	2.65%	8.55%	13.57%
Sector *	66 Neutral	$17.65B	18.10	5.60%	3.62%	6.62%	11.55%

American Water Corporate Events

American Water Expands Board with New Director Appointment

On August 26, 2025, American Water Works Company, Inc. appointed Lisa A. Grow as an independent director to its board, expanding the board from nine to ten members. Ms. Grow, who brings nearly four decades of experience in the utility industry, is expected to enhance the board’s expertise with her regulatory, customer, and operational knowledge. Her appointment reflects American Water’s strategic focus on strengthening its leadership to benefit its operations and stakeholders.

American Water Enters New Forward Sale Agreements

On August 7, 2025, American Water Works Company, Inc. entered into additional forward sale agreements with several banks for the sale of over 1 million shares of its common stock, following a previous underwriting agreement for a larger public offering. This move was part of a broader financial strategy, including the issuance of $900 million in senior notes by its subsidiary, American Water Capital Corp., to support its regulated business segment, repay obligations, and fund general corporate purposes.

American Water Finalizes Forward Sale Agreements

On August 4, 2025, American Water Works Company, Inc. entered into forward sale agreements with Wells Fargo, JPMorgan Chase, and Mizuho Markets for over 7 million shares of its common stock. This move, finalized on August 6, 2025, involved an underwriting agreement allowing the sale of these shares to underwriters, with an option for additional shares. The transaction is part of a registered public offering under the Securities Act of 1933, potentially impacting American Water’s financial operations and market positioning.

American Water Seeks Rate Increase in Maryland

On August 1, 2025, Maryland American Water filed a request with the Maryland Public Service Commission to adjust its water rates, seeking an increase of $3.0 million in annualized revenues. This request is driven by $22 million in capital investments made from February 2019 through April 2025, aimed at replacing aging infrastructure and maintaining high-quality water service. The proposed rates include a two-tiered structure to promote affordability, with potential increases for residential customers in Bel Air and the Severn District. The new rates, if approved, are expected to take effect in March 2026, following a thorough review by the Commission.

American Water Seeks Rate Increase for Infrastructure Upgrades

On July 1, 2025, California American Water filed a request with the California Public Utilities Commission to increase water and wastewater rates for 2027-2029, driven by $750 million in infrastructure investments. If approved, the new rates would affect customer bills starting January 2027, with potential changes ranging from a $3 decrease to a $17 increase per month. The proposal aims to enhance infrastructure and ensure reliable service, with opportunities for customer involvement in the review process.

American Water Expands Board with New Director Appointment

On June 9, 2025, American Water Works Company, Inc. announced the appointment of Raffiq Nathoo as an independent director, expanding the board from eight to nine members. Nathoo, with over 30 years of experience in international financial and capital markets, particularly in the energy, power, and utilities sectors, is expected to enhance the board’s capabilities. His appointment is seen as a strategic move to strengthen the company’s governance and operational oversight, potentially impacting its industry positioning positively.