NEW YORK (TheStreet) -- Providing clean water all over the world is a significant global challenge, both for water utility stocks and for conservationists. In a 2012 article, I mentioned that the United Nations and organizations such as Water.org were addressing this problem. Today I focus on water conservation on Main Street -- where water bills are higher due to new water meters and the general overuse of water.
I live in a community in Pasco County, Fla., just north of Tampa. A few months ago Pasco County Utilities installed new water meters to improve billing for the 960 homes in the area where I live. Since December 2013, my water bill went from $142.98 to $164.74. My community was featured on the local NBC affiliate TV station WFLA in Tampa, when a resident called in with the complaint that Pasco County Utilities was over-charging consumers.
But high water bills may make water utility stocks more appealing for investors.
My advice to homeowners around the country is to conserve water, have your sprinkler system inspected and make sure you are using your system in compliance with local regulations.
That, and consider investing.
Here are the water utility stocks to consider as investments for both gains and dividends. Some of these companies cover one or two cities, others have services in many states, and one or two have businesses outside the U.S., including Ontario, Canada, the Cayman Islands and the Bahamas.
Today's first "crunching the numbers" table shows that only four out of 12 stocks are above all five key moving averages. I included the 12-month trailing price-to-earnings ratios and the dividend yields.
Consolidated Water (CWCO) ($10.90) has the highest P/E ratio at 47.3, and has gained 36% since June 15, 2012. This stock is below four of five moving averages, making its 200-week simple moving average at $9.95 a key support. Its 12x3x3 weekly slow stochastic is rising and thus a weekly close above its five-week modified moving average at $11.39 would be positive for this stock.
This company reports quarterly results on Aug. 1, and analysts expect earnings per share to be 7 cents.
Monthly and annual value levels are $9.44 and $9.13, respectively, with a weekly pivot at $10.37 and annual and quarterly risky levels at $13.93 and $14.50, respectively.
Veolia Environment (VE) ($17.75) has the largest dividend yield at 4.67%, but this stock has a negative weekly chart with its five-week MMA at $18.88 and its 200-week SMA at $17.67 as a key level to hold. This stock was the water bubble stock, trading as high as $96.61 in December 2007. The stock has been below its 200-day SMA at $17.87 for the past two days.
This company reports quarterly results on Aug. 28, but there are no analysts' earnings estimates as of today.
A semiannual value level is $13.54, with a quarterly pivot at $18.21 and monthly and annual risky levels at $19.13 and $22.27, respectively.
The biggest gainer since June 15, 2012, is Pure Cycle Corp (PCYO) ($6.53), with a gain of 201% since then. This stock is above all five key moving averages with a positive weekly chart, with its five-week MMA at $6.21.
This company reports quarterly results Thursday, and analysts expect an earnings-per-share loss of a penny.
Monthly and semiannual value levels are $5.67 and $5.59, respectively, with weekly and quarterly risky levels at $6.94 and $7.92, respectively.
The second "crunching the numbers" table gives investors the analysts' earnings-per-share estimates, as these companies report quarterly results between July 10 and Aug. 28.
Next up: the technical charts.
Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics
This table provides the technical status for the stocks profiled in today's report.
The 12 month trailing price to earnings ratio
The Dividend Yield
There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.
The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.
Interpretations: Stocks below a moving average are listed in red.
Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.
A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.
A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.
A stock with a neutral technical rating has a profile that is not positive or negative.
The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three to five year horizon.
The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.
The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.
The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six to 12 month horizon.
Another technical chart is up next.
Crunching the Numbers with Richard Suttmeier: Earnings & Where to Buy & Sell
This table presents the EPS estimates including date and before or after the close, and where to buy on weakness and where to sell on strength.
Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.
Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.
At the time of publication the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates CONSOLIDATED WATER CO INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate CONSOLIDATED WATER CO INC (CWCO) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- CWCO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.32, which clearly demonstrates the ability to cover short-term cash needs.
- 36.52% is the gross profit margin for CONSOLIDATED WATER CO INC which we consider to be strong. Regardless of CWCO's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CWCO's net profit margin of 4.00% is significantly lower than the industry average.
- CWCO, with its decline in revenue, underperformed when compared the industry average of 10.3%. Since the same quarter one year prior, revenues slightly dropped by 1.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- CONSOLIDATED WATER CO INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, CONSOLIDATED WATER CO INC reported lower earnings of $0.58 versus $0.64 in the prior year. For the next year, the market is expecting a contraction of 39.6% in earnings ($0.35 versus $0.58).
- You can view the full analysis from the report here: CWCO Ratings Report
heStreet Ratings team rates PURE CYCLE CORP as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate PURE CYCLE CORP (PCYO) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- PCYO's very impressive revenue growth greatly exceeded the industry average of 10.3%. Since the same quarter one year prior, revenues leaped by 69.0%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PCYO's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, PCYO has a quick ratio of 2.09, which demonstrates the ability of the company to cover short-term liquidity needs.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Water Utilities industry and the overall market, PURE CYCLE CORP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly decreased to -$1.44 million or 193.26% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: PCYO Ratings Report