Will Aqua America (WTR) Stock Be Boosted By Expansion Plans?

NEW YORK (TheStreet) -- Aqua America Inc.  (WTR), which is the second-largest publicly traded water company in the U.S., is looking for new assets to expand its footprint as American cities with debt issues consider partnerships with utilities, Bloomberg reports.

With municipalities open to partnerships or outright divestiture of their water systems, Aqua America's "next step will probably be M&A, and probably with cities," Chairman and CEO Nicholas DeBenedictis said in an interview. "We're looking to grow our capital base," Bloomberg said.

Shares of Aqua America are up 0.35% to $25.51.

Must Read: Warren Buffett's 25 Favorite Growth Stocks

 

TheStreet Ratings team rates AQUA AMERICA INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate AQUA AMERICA INC (WTR) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 10.3%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • AQUA AMERICA INC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, AQUA AMERICA INC increased its bottom line by earning $1.16 versus $1.05 in the prior year. This year, the market expects an improvement in earnings ($1.20 versus $1.16).
  • Net operating cash flow has slightly increased to $89.93 million or 1.05% when compared to the same quarter last year. Despite an increase in cash flow, AQUA AMERICA INC's cash flow growth rate is still lower than the industry average growth rate of 22.11%.
  • The gross profit margin for AQUA AMERICA INC is rather high; currently it is at 53.51%. Regardless of WTR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, WTR's net profit margin of 23.46% compares favorably to the industry average.
  • In its most recent trading session, WTR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • You can view the full analysis from the report here: WTR Ratings Report

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