This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

3 Undervalued Plays In Water Stocks

Stocks in this article: FELE LNN SJW

Mary-Lynn Cesar, Kapitall: Water systems in the US are aging, and the dual challenges of water scarcity and a growing population are placing more pressure on the existing infrastructure. By 2030, the Environmental Protection Agency (EPA) estimates that the cost of upgrades for the nation’s 73,400 community and non-community water systems will total $384.2 billion. However, funding for these projects remains a concern as decreased water consumption and low monthly rates have diminished the revenue that water utilities rely on to finance their operations.

[Read more from Kapitall: Time For Time Warner To Admit They Lost]

The EPA’s estimate comes from its latest Drinking Water Infrastructure Needs Survey and Assessment (DWINSA), the fifth report of its kind released to Congress. The DWINSA is released every four years, and the cost of fixing the nation’s water infrastructure has risen by 69% from the $227.3 billion presented in the 1997 inaugural report. As the price tag associated with the water systems overhaul continues to rise, it’s more imperative that water utilities figure out how to pay for the upgrades. Ceres, a sustainability-focused nonprofit, and the University of North Carolina – Chapel Hill are presently working with water systems nationwide to help them develop pricing that will help fund infrastructure replacement and repairs.

Investing ideas

For the following screen, we turned our focus to water stocks that may benefit from the coming investments in updating the US water infrastructure. We specifically turned our attention to their profits, which we expect to rise as more localities revamp their water systems. To begin, we created a universe comprised of water stocks pulled together from the S&P Global Water Index and the Calvert Global Water Fund. We subsequently narrowed down that list to companies based and operating in the US.

Next, we screened for stocks with rising profits as illustrated by rising diluted normalized earnings per share (EPS) for the past three consecutive years. EPS refers to the amount of a company’s profit allocated per outstanding share of common stock. Diluted normalized EPS differs from normalized EPS because it takes convertible securities into consideration. These convertible securities – which include options, warrens, and convertible preferred shares – can be exercised and lower net income. That’s why diluted normalized EPS tends to be both lower and more conservative than normalized EPS.

We then looked for potentially undervalued stocks as indicated by a low Price to Sales (P/S) ratio. A P/S ratio is a valuation metric that compares a stock’s price to what the company generates in revenue. When a company has a low P/S ratio, it means that its price is cheap in relation to the company’s revenue. If a stock’s P/S is below 1, it can be considered undervalued. However, investors should note that this ratio doesn’t take expenses or debt into consideration, and variation between industries is normal.

For this list we screened for stocks with P/S ratios under 2, which means that the company’s market cap isn’t greater than 2x its annual sales.

We were left with three stocks on our list.

Click on the image below to see returns over time. Yearly return data sourced from Zacks Investment Research.

Analyze These Ideas:  Compare analyst ratings to annual returns  for stocks mentioned. 


1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs