H2O America (HTO) AI Stock Analysis

• Market Cap: $1.76B
• Dividend Yield: 1.68%
• Average Volume (3M): 251.53K
• Price to Earnings (P/E): 16.3
• Beta (1Y): 0.23
• Revenue Growth: 12.40%
• EPS Growth: 11.98%
• Country: US
• Employees: 822
• Sector: Utilities
• Sector Strength: 62
• Industry: Regulated Water
• EPS (TTM): 0.71
• Shares Outstanding: 35,287,080
• 10 Day Avg. Volume: 239,111
• 30 Day Avg. Volume: 251,527
• 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: 2.08
• Enterprise Value/Revenue: 4.65
• Enterprise Value/Gross Profit: 8.19
• Enterprise Value/Ebitda: 12.11
• 1Y Price Target: $59.33
• Price Target Upside: 18.80% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 3

• Rating: 70 Outperform
• Price Target: $51.00 ▲(2.12% Upside)

The overall score reflects strong financial performance and a strategic acquisition, tempered by technical indicators showing bearish trends. The valuation is reasonable, but liquidity challenges and moderate leverage need addressing.

Positive Factors

Earnings Growth

1Q25 adjusted EPS of $0.50 increased 39% YoY driven by the timing of rate relief primarily from the California general rate case.

Strategic Acquisition

HTO’s acquisition of Quadvest provides strategic exposure to the rapidly-growing Houston metropolitan service territories and provides up to $500mn of follow-on capex opportunities.

Negative Factors

Dilutive Impact

HTO would likely see dilutive EPS impacts from unrecovered financing costs ($350mn-$450mn equity issuance) and higher D&A expenses (D&A will step up to FMV asset base determination) but rates will not reflect the higher carry costs.

Financing Risks

There are financing risks, including a forecasted need for $425 million in equity over the 2025-2029 period, which is about 25% of the current market cap.

H2O America Business Overview & Revenue Model

Company Description

H2O America (HTO) is a leading provider of innovative water filtration and purification solutions, catering primarily to residential, commercial, and industrial sectors. The company specializes in a range of products including water filtration systems, reverse osmosis units, and water softeners, designed to improve water quality and safety. H2O America is committed to sustainability and aims to provide accessible clean water solutions while promoting environmental responsibility.

How the Company Makes Money

H2O America generates revenue through multiple streams, primarily by selling its water filtration and purification products directly to consumers and businesses. The company also offers installation and maintenance services, which provide a recurring revenue opportunity. Additionally, H2O America may engage in partnerships with retailers and distributors to expand its market reach, leveraging these relationships to drive sales. The company may also explore subscription-based models for filter replacements and maintenance services, ensuring steady cash flow while fostering customer loyalty.

H2O America Financial Statement Overview

Summary

H2O America demonstrates strong profitability and revenue growth, supported by efficient operations. However, challenges with negative free cash flow and moderate leverage need attention for sustained financial health.

Income Statement

H2O America shows consistent revenue growth with a TTM increase of 2.88%. The company maintains strong profitability with a gross profit margin of 56.73% and a net profit margin of 13.03%. EBIT and EBITDA margins are healthy at 23.56% and 38.37% respectively, indicating efficient operations. However, the growth rate has slowed compared to previous years, which could be a concern if the trend continues.

Balance Sheet

The company's debt-to-equity ratio is 1.28, reflecting a moderate level of leverage, which has improved from previous years. Return on equity is stable at 7.39%, but there is room for improvement. The equity ratio stands at 30.24%, suggesting a balanced capital structure, though slightly lower than ideal for the industry.

Cash Flow

Operating cash flow is positive, but the free cash flow remains negative, with a TTM free cash flow to net income ratio of -1.15. While there is a positive growth in free cash flow, the negative figures indicate potential liquidity challenges. The operating cash flow to net income ratio of 0.63 suggests adequate cash generation relative to net income, but improvements are needed in free cash flow management.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	788.74M	748.44M	670.36M	620.70M	573.69M	564.53M
Gross Profit	447.44M	425.12M	388.43M	357.17M	318.57M	316.58M
EBITDA	302.67M	289.38M	265.23M	246.82M	219.66M	215.77M
Net Income	102.80M	93.97M	84.99M	73.83M	60.48M	61.52M
Balance Sheet
Total Assets	4.85B	4.66B	4.35B	3.76B	3.49B	3.31B
Cash, Cash Equivalents and Short-Term Investments	19.85M	11.11M	9.72M	12.34M	10.91M	5.27M
Total Debt	1.87B	1.83B	1.75B	1.66B	1.60B	1.54B
Total Liabilities	3.38B	3.29B	3.11B	2.64B	2.46B	2.39B
Stockholders Equity	1.47B	1.37B	1.23B	1.11B	1.03B	917.16M
Cash Flow
Free Cash Flow	-227.92M	-185.11M	-99.89M	-78.04M	-123.77M	-110.92M
Operating Cash Flow	199.01M	195.53M	190.83M	166.20M	130.04M	104.05M
Investing Cash Flow	-426.99M	-340.10M	-322.27M	-244.33M	-260.00M	-214.26M
Financing Cash Flow	225.02M	145.96M	128.82M	78.35M	132.81M	101.53M

H2O America Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 49.94
• 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 HTO, the sentiment is Neutral. The current price of 49.94 is below the 20-day moving average (MA) of 50.03, below the 50-day MA of 50.16, and below the 200-day MA of 51.14, indicating a bearish trend. The MACD of -0.04 indicates Positive momentum. The RSI at 49.81 is Neutral, neither overbought nor oversold. The STOCH value of 26.68 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for HTO.

H2O America Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSEX	76 Outperform	$959.39M	22.01	9.70%	2.56%	11.91%	16.88%
ARTNA	75 Outperform	$340.49M	15.04	9.34%	3.70%	7.13%	22.19%
HTO	70 Outperform	$1.76B	16.25	7.50%	1.68%	12.40%	11.98%
CWT	68 Neutral	$2.74B	20.10	8.49%	2.61%	0.62%	-24.24%
Sector *	66 Neutral	$17.25B	17.87	5.54%	3.65%	6.63%	11.55%
AWR	66 Neutral	$2.86B	22.53	13.77%	2.56%	8.55%	13.57%
YORW	61 Neutral	$443.31M	22.20	8.56%	2.82%	4.09%	-14.30%

H2O America Corporate Events

H2O America Acquires Quadvest Assets for $540 Million

On July 7, 2025, H2O America, through its subsidiaries, entered into agreements to acquire the assets of Quadvest’s water and sewer utility businesses for a total of $540 million. This strategic acquisition is expected to significantly expand H2O America’s presence in Texas, particularly in the high-growth Houston region, and is projected to be accretive to the company’s long-term EPS growth rate. The transaction, which requires regulatory approvals, aims to enhance operational scale and customer service, positioning H2O America as the second largest investor-owned water utility in Texas by 2028.

H2O America Appoints New Chief Accounting Officer

On June 24, 2025, H2O America announced the appointment of Megan Mattern as the Chief Accounting Officer, Principal Accounting Officer, and Controller, effective July 28, 2025. This strategic appointment follows the recent designation of Ann P. Kelly as Chief Financial Officer and Treasurer, highlighting a significant leadership transition within the company. Mattern brings extensive experience from her previous roles at UGI Corporation and PPL Corporation. The Executive Compensation Committee approved a comprehensive compensation package for Mattern, including a base salary, incentive cash compensation, and restricted stock unit awards, aligning with the company’s long-term incentive plan.