American Water (AWK) AI Stock Analysis

• Market Cap: $29.01B
• Dividend Yield: 2.25%
• Average Volume (3M): 1.45M
• Price to Earnings (P/E): 25.5
• Beta (1Y): 0.05
• Revenue Growth: 13.37%
• EPS Growth: 13.29%
• Country: US
• Employees: 6,700
• Sector: Utilities
• Sector Strength: 64
• Industry: Regulated Water
• EPS (TTM): 1.48
• Shares Outstanding: 202,140,820
• 10 Day Avg. Volume: 1,110,061
• 30 Day Avg. Volume: 1,452,490
• 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: 1.45
• Enterprise Value/Revenue: 8.50
• Enterprise Value/Gross Profit: 14.13
• Enterprise Value/Ebitda: 14.95
• 1Y Price Target: $140.38
• Price Target Upside: -0.73% Downside
• Rating Consensus: Hold
• Number of Analyst Covering: 8

• Rating: 69 Neutral
• Price Target: $155.00 ▲(9.61% Upside)

American Water's overall stock score is driven by strong earnings growth and strategic acquisitions, as highlighted in the earnings call. However, financial performance is impacted by high leverage and negative free cash flow, while technical indicators suggest a cautious outlook. The valuation is moderate, and recent corporate events are positive but have a limited impact on the overall score.

Positive Factors

Acquisition Opportunities

The $315 million transaction with Nexus Water Group would significantly increase AWK's acquisition backlog, tripling it in the process.

Investment Outlook

AWK's investment outlook has several positive attributes including top quartile 8% EPS growth and constructive regulatory jurisdictions with no major rate cases until 4Q'25.

Negative Factors

Regulatory Challenges

The lack of catalysts and potential slowdown in PFAS rule implementation due to complexity of enforcement with tens of thousands of small systems in the U.S.

Valuation Concerns

The analyst maintains an Underperform rating on AWK primarily due to valuation, which is at a 35% premium compared to electric and gas peers.

American Water Business Overview & Revenue Model

Company Description

American Water Works Company, Inc. (AWK) is the largest publicly traded water and wastewater utility company in the United States. Founded in 1886 and headquartered in Camden, New Jersey, American Water operates across various segments, including the Regulated Businesses and the Market-Based Businesses. Its core services encompass the provision of drinking water, wastewater treatment, and water-related services to residential, commercial, and industrial customers, serving approximately 14 million people in 24 states and parts of Canada.

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: 141.41
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Positive

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 141.41 is below the 20-day moving average (MA) of 143.72, below the 50-day MA of 141.92, and above the 200-day MA of 136.27, indicating a neutral trend. The MACD of 0.40 indicates Positive momentum. The RSI at 44.71 is Neutral, neither overbought nor oversold. The STOCH value of 8.28 is Positive, 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
WTRG	79 Outperform	$11.08B	16.90	10.02%	3.40%	20.70%	14.59%
SBS	76 Outperform	$15.39B	7.83	30.12%	2.41%	30.74%	143.94%
MSEX	71 Outperform	$964.61M	21.74	9.70%	2.60%	11.91%	16.88%
AWK	69 Neutral	$29.01B	25.46	10.40%	2.25%	13.37%	13.29%
CWT	68 Neutral	$2.80B	20.49	8.49%	2.60%	0.62%	-24.24%
Sector *	66 Neutral	$17.34B	17.87	5.54%	3.65%	6.63%	11.55%
AWR	66 Neutral	$2.87B	22.84	13.77%	2.59%	8.55%	13.57%

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.