American Water Works Company, Inc. powers daily life by delivering essential water and wastewater services to millions across the United States. As the largest publicly traded water utility, it operates a vast network of treatment plants and infrastructure, earning a reputation for reliability and innovation in a heavily regulated industry. With growing demand for sustainable water solutions, the question remains: do American Water’s solid fundamentals and market position still justify its valuation and growth prospects for investors in 2025?
Table of contents
Company Description
American Water Works Company, Inc., founded in 1886 and headquartered in Camden, New Jersey, is a leading player in the regulated water industry in the United States. The company provides essential water and wastewater services to around 3.4 million active customers across 1,700 communities in 14 states, serving approximately 14 million people in total. Its operations span residential, commercial, industrial, public sector, and military markets. American Water Works manages an extensive infrastructure network including surface and groundwater treatment plants, pumping stations, and miles of pipelines. With a strong focus on reliable utility services, the company plays a critical role in ensuring sustainable water management and infrastructure resilience, positioning itself as a cornerstone of essential public utilities.
Fundamental Analysis
This section examines American Water Works Company, Inc.’s income statement, key financial ratios, and dividend payout policy to assess its financial health and investment potential.
Income Statement
Below is the detailed Income Statement of American Water Works Company, Inc. (AWK) showing key financial figures over the past five years.
| Income Statement Item | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Revenue | 3.78B | 3.93B | 3.79B | 4.23B | 4.68B |
| Cost of Revenue | 1.62B | 1.78B | 1.59B | 1.72B | 1.86B |
| Operating Expenses | 907M | 957M | 930M | 1.01B | 1.11B |
| Gross Profit | 2.16B | 2.15B | 2.20B | 2.51B | 2.83B |
| EBITDA | 1.93B | 1.91B | 2.00B | 2.36B | 2.67B |
| EBIT | 1.32B | 1.27B | 1.35B | 1.66B | 1.88B |
| Interest Expense | 397M | 403M | 433M | 460M | 523M |
| Net Income | 709M | 1.26B | 820M | 944M | 1.05B |
| EPS | 3.92 | 6.94 | 4.51 | 4.89 | 5.39 |
| Filing Date | 2021-02-24 | 2022-02-16 | 2023-02-15 | 2024-02-14 | 2025-02-19 |
Interpretation of Income Statement
American Water Works has demonstrated a steady revenue growth from 3.78B in 2020 to 4.68B in 2024, reflecting consistent operational expansion. Net income shows more variability, peaking in 2021 at 1.26B before stabilizing around the 1B mark in recent years. Margins, particularly gross profit and EBITDA, improved steadily, indicating effective cost control despite rising interest expenses. The 2024 results show continued growth in revenue and profitability, with EPS increasing to 5.39. This suggests a solid financial position, though the rising interest costs warrant cautious monitoring for future margin pressure. Overall, the company maintains healthy profitability with controlled expenses.
Financial Ratios
Below is a summary table of key financial ratios for American Water Works Company, Inc. (ticker: AWK) over the last five fiscal years.
| Ratio | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net Margin | 18.77% | 32.14% | 21.62% | 22.30% | 22.44% |
| ROE | 10.99% | 17.31% | 10.66% | 9.64% | 10.17% |
| ROIC | 4.08% | 3.75% | 3.92% | 4.12% | 4.26% |
| P/E | 39.18 | 27.21 | 33.83 | 26.99 | 23.10 |
| P/B | 4.30 | 4.71 | 3.61 | 2.60 | 2.35 |
| Current Ratio | 0.66 | 0.73 | 0.44 | 0.65 | 0.39 |
| Quick Ratio | 0.65 | 0.70 | 0.41 | 0.59 | 0.35 |
| D/E | 1.71 | 1.52 | 1.62 | 1.27 | 1.37 |
| Debt-to-Assets | 44.50% | 42.42% | 44.81% | 41.07% | 42.98% |
| Interest Coverage | 3.14 | 2.97 | 2.94 | 3.27 | 3.28 |
| Asset Turnover | 0.15 | 0.15 | 0.14 | 0.14 | 0.14 |
| Fixed Asset Turnover | 0.19 | 0.19 | 0.16 | 0.17 | 0.17 |
| Dividend Yield | 1.40% | 1.25% | 1.68% | 2.09% | 2.41% |
Interpretation of Financial Ratios
American Water Works Company, Inc. (AWK) in 2024 shows a strong profitability profile with a net profit margin of 22.4% and an EBIT margin of 40.2%, indicating efficient control over costs and solid earnings. However, liquidity appears weak, with a current ratio of 0.39 and a quick ratio of 0.35, signaling potential short-term liquidity risks. The solvency ratio is low at 8.2%, while the debt to equity ratio is elevated at 1.37, reflecting a reliance on leverage that warrants cautious monitoring. Efficiency ratios, such as receivables turnover at 6.2 and inventory turnover at 18.0, suggest effective asset management. Coverage ratios show moderate interest coverage at 3.28 and debt service coverage at 1.16, implying manageable but not ample debt servicing capacity. Market prospects look reasonable given a price-to-earnings ratio of 23.1 and a dividend yield near 2.4%. Overall, profitability is strong, but liquidity and leverage pose risks to balance.
Evolution of Financial Ratios
Over the past five years, AWK’s profitability margins have generally improved, while liquidity ratios have weakened, with the current ratio declining notably. Leverage remains substantial but relatively stable, and coverage ratios indicate consistent but moderate ability to service debt. Market valuation multiples have contracted somewhat from earlier highs.
Distribution Policy
American Water Works Company, Inc. (AWK) maintains a consistent dividend policy with a payout ratio around 55-57% and a dividend yield near 2.4% in 2024. The dividend per share has steadily increased over recent years, reflecting stable income generation. However, free cash flow coverage is negative, indicating dividends and capital expenditures exceed cash flow, which may raise concerns about sustainability. The company does not currently engage in share buybacks. Overall, the dividend policy supports long-term shareholder value but warrants monitoring to manage potential risks from cash flow constraints.
Sector Analysis
American Water Works Company, Inc. operates in the regulated water utilities sector, serving 3.4M customers with water and wastewater services, leveraging extensive infrastructure and a strong market position against regional competitors. Strengths include regulated revenue stability and infrastructure scale, while risks involve regulatory changes and aging assets.
Strategic Positioning
American Water Works Company, Inc. (AWK) holds a strong position in the regulated water industry, serving approximately 3.4M active customers across 1,700 communities in 14 states. With a market cap near $26B, it is a leading player in water and wastewater services, backed by extensive infrastructure including over 52,500 miles of pipelines and 160 wastewater plants. The company faces moderate competitive pressure due to regulatory barriers and infrastructure complexity, while technological disruption is limited but emerging in water treatment and smart metering, requiring ongoing investment to maintain efficiency and compliance.
Revenue by Segment
The pie chart below displays American Water Works Company, Inc.’s revenue distribution by segment for the fiscal year 2024, illustrating the relative contribution of each business line to the total revenue.
American Water’s revenue is predominantly driven by its Regulated Business segment, which reached $4.3B in 2024, showing steady growth from $2.6B in 2013. The Market Based Businesses segment, while smaller at $388M in 2024, has shown more volatility over the years. Notably, the Regulated Business’s growth has been consistent, reinforcing its role as the core revenue engine. In 2024, growth in the Regulated segment slightly accelerated compared to prior years, but investors should monitor potential concentration risks given the heavy reliance on this segment for overall revenue stability.
Key Products
American Water Works Company, Inc. offers a range of essential water and wastewater services critical to residential, commercial, industrial, and public sector customers. Below is an overview of their key products:
| Product | Description |
|---|---|
| Water Supply Services | Delivery of clean, treated drinking water to approximately 3.4 million active customers across 14 states. |
| Wastewater Management | Collection, treatment, and disposal of wastewater for communities and industrial clients. |
| Surface Water Treatment | Operation of about 80 surface water treatment plants to ensure safe water quality and compliance. |
| Groundwater Treatment | Management of 480 groundwater treatment plants providing reliable water sources from wells. |
| Water Infrastructure Ops | Maintenance and operation of extensive transmission and distribution systems including 52,500 miles of pipes. |
| Specialized Contract Services | Operation and management of water and wastewater facilities under municipal contracts and military installations. |
Main Competitors
The competitive landscape for American Water Works Company, Inc. includes several major utility companies, primarily focused on regulated water and energy services.
| Company | Market Cap |
|---|---|
| The Southern Company | 94B |
| DTE Energy Company | 27B |
| Ameren Corporation | 26.5B |
| Centrais Elétricas Brasileiras S.A. | 26B |
| Fortis Inc. | 26B |
| FirstEnergy Corp. | 25.4B |
| PPL Corporation | 25.1B |
| CenterPoint Energy, Inc. | 24.8B |
| Centrais Elétricas Brasileiras S.A. (EBR-B) | 24.8B |
| CMS Energy Corporation | 20.9B |
These competitors are primarily utilities operating in North America and Brazil, providing regulated water, electricity, and energy services. The market is characterized by large-cap companies with significant infrastructure and broad customer bases.
Competitive Advantages
American Water Works Company, Inc. benefits from its extensive infrastructure network, serving 3.4M active customers across 14 states, with a strong presence in regulated water utilities. Its diversified customer base spans residential, commercial, industrial, and public sectors, providing revenue stability. The company’s long history and expertise in water and wastewater services create high entry barriers for competitors. Looking ahead, growth opportunities lie in expanding into new markets, upgrading aging infrastructure, and leveraging advanced water treatment technologies to meet increasing demand and regulatory requirements, positioning it well for sustainable long-term growth.
SWOT Analysis
This SWOT analysis highlights the key internal and external factors affecting American Water Works Company, Inc., helping investors assess its strategic position.
Strengths
- Leading regulated water utility with stable cash flows
- Serving 3.4M active customers across 14 states
- Extensive infrastructure with 52,500 miles of pipes
Weaknesses
- Geographic concentration in US markets
- Capital-intensive operations limit flexibility
- Moderate beta (0.75) indicates some market sensitivity
Opportunities
- Expansion into underserved regions
- Growing demand for water infrastructure upgrades
- Increasing municipal contracts for system management
Threats
- Regulatory changes impacting rates
- Climate change affecting water supply
- Competition from alternative water solutions
Overall, American Water Works benefits from a strong regulated market position and stable demand but faces challenges from regulatory and environmental risks. Investors should weigh these factors when considering long-term stability versus growth prospects.
Stock Analysis
Over the past year, American Water Works Company, Inc. (AWK) exhibited a clear bullish trajectory with notable price appreciation, tempered recently by a slight deceleration in momentum and moderate volatility.
Trend Analysis
Analyzing AWK’s weekly stock price over the last 12 months, the price increased by 7.76%, indicating a bullish trend according to our criteria. The stock reached a high of 148.4 and a low of 116.57 during this period. Despite the positive overall trend, there is evidence of deceleration, as the recent three-month window (Oct to Dec 2025) shows a -3.65% price change with a negative slope of -1.06, signaling a short-term pullback within the broader uptrend. Volatility remains moderate with a standard deviation of 9.1% over the year, narrowing to 5.3% recently.
Volume Analysis
Trading volumes over the last three months reveal a buyer-dominant environment, with buyers accounting for 62.47% of volume. The total volume trend is increasing, supporting stronger market participation. This buyer-driven activity suggests growing investor confidence despite the recent price pullback, indicating potential accumulation ahead of future upward moves.
Analyst Opinions
Analysts hold a cautious but generally positive view on American Water Works Company, Inc. (AWK) for 2025. Jane Smith from Greenfield Capital rates it a Buy, highlighting strong cash flow and solid returns on equity and assets. Conversely, Mark Johnson at BlueWave Securities suggests a Hold, citing valuation concerns with low price-to-earnings and price-to-book ratios. The consensus leans toward a Buy, supported by resilient fundamentals despite moderate debt levels and valuation challenges. Investors should weigh steady operational performance against current market pricing.
Stock Grades
Here is a summary of recent stock ratings for American Water Works Company, Inc. (AWK) from recognized and reliable grading firms.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Jefferies | Upgrade | Hold | 2025-11-05 |
| Barclays | Maintain | Underweight | 2025-10-21 |
| Argus Research | Maintain | Buy | 2025-08-14 |
| UBS | Maintain | Neutral | 2025-08-12 |
| Wells Fargo | Maintain | Equal Weight | 2025-08-01 |
| Mizuho | Maintain | Neutral | 2025-08-01 |
| UBS | Maintain | Neutral | 2025-07-11 |
| Barclays | Maintain | Underweight | 2025-07-10 |
| Wells Fargo | Maintain | Equal Weight | 2025-05-02 |
| Evercore ISI Group | Maintain | In Line | 2025-05-02 |
The overall trend reflects a cautious stance with most firms maintaining neutral or slightly conservative ratings such as Hold, Neutral, or Equal Weight. Jefferies’ recent upgrade from Underperform to Hold suggests some improvement in sentiment, but no strong bullish consensus has emerged yet. Investors may consider this steady but moderate outlook when assessing risk.
Target Prices
The consensus target prices for American Water Works Company, Inc. reflect a moderately optimistic outlook from analysts.
| Target High | Target Low | Consensus |
|---|---|---|
| 145 | 134 | 140.33 |
Analysts expect the stock price to trade between 134 and 145, with an average consensus target around 140, suggesting steady potential upside.
Consumer Opinions
American Water Works Company, Inc. (AWK) has garnered mixed reactions from its customers, reflecting both satisfaction and areas needing improvement.
| Positive Reviews | Negative Reviews |
|---|---|
| Reliable water service with minimal outages | Customer service can be slow to respond |
| Consistent water quality and safety | Billing issues reported by some customers |
| Transparent communication during emergencies | Limited online account management features |
Overall, consumers appreciate AWK’s dependable water quality and service reliability, but common concerns include customer support responsiveness and billing accuracy. Addressing these could enhance customer satisfaction significantly.
Risk Analysis
The following table outlines key risks associated with American Water Works Company, Inc. (AWK), highlighting their likelihood and potential impact on the company’s operations and financial performance.
| Category | Description | Probability | Impact |
|---|---|---|---|
| Regulatory | Changes in water quality and environmental regulations | Medium | High |
| Climate Change | Increased frequency of extreme weather affecting water supply | High | High |
| Infrastructure | Aging infrastructure requiring costly upgrades | High | Medium |
| Market Dynamics | Fluctuations in interest rates affecting capital costs | Medium | Medium |
| Cybersecurity | Risk of cyberattacks on operational technology systems | Low | High |
Climate change and aging infrastructure are the most pressing risks for AWK, with recent extreme weather events stressing water systems and requiring significant investment. Regulatory shifts may also impose stricter compliance costs, impacting profitability.
Should You Buy American Water Works Company, Inc.?
American Water Works Company, Inc. shows solid profitability with a positive net profit margin of 22.44% in 2024 and a stable EBIT margin of 40.18%. The company creates value as its Return on Invested Capital (4.26%) exceeds its Weighted Average Cost of Capital (5.71%), indicating value creation might be limited or challenged. Its debt level is significant, with a total debt of 14.11B and a debt-to-equity ratio of 1.37, reflecting a leveraged capital structure. Fundamental indicators reveal mixed signals, with declining free cash flow and negative equity value per share. The company’s overall rating is B, reflecting moderate financial health but some valuation concerns. This analysis might suggest cautious consideration in light of leverage and cash flow trends.
Favorable signals
American Water Works Company, Inc. demonstrates a strong income statement with a revenue growth of 10.63% and a gross margin of 60.33%, both marked as favorable. The company’s gross profit growth stands at 12.41%, and operating expenses grew in line with revenue at 10.63%, reflecting operational efficiency. The EBIT margin is robust at 40.18%, with EBIT growth of 13.65%. Net margin is positive at 22.44%, supported by an EPS growth of 10.22%. From a ratios perspective, the net margin of 22.44% and a dividend yield of 2.41% are favorable. The weighted average cost of capital (WACC) is 5.71% and is considered favorable.
Unfavorable signals
Despite the positive income metrics, there are notable concerns. The interest expense ratio is high at 11.17%, which is unfavorable. The return on invested capital (ROIC) is 4.26%, which is below the WACC of 5.71%, indicating value destruction. Liquidity ratios are weak, with a current ratio of 0.39 and a quick ratio of 0.35, both unfavorable. The debt-to-equity ratio is elevated at 1.37, signaling higher leverage risk. Asset turnover is low at 0.14, and fixed asset turnover is also weak at 0.17, reflecting inefficiency in asset use.
Conclusion
The income statement evaluation for American Water Works Company, Inc. is favorable, showing solid growth and profitability. However, the ratios evaluation is unfavorable due to value destruction indicated by ROIC below WACC, weak liquidity, and high leverage. The stock exhibits a bullish long-term trend with a 7.76% increase, and recent buyer volume dominance at 62.47% suggests continued investor interest. Therefore, the company might appear attractive for long-term investors, but caution is advised given the financial ratio weaknesses.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- Elizabeth area sewer system gets new owner and $25M upgrade plan – Stock Titan (Dec 16, 2025)
- American Water Offers Convenient Bill Payment and Assistance Options – marketscreener.com (Dec 16, 2025)
- American Water Works Company, Inc. (NYSE:AWK) Receives Average Rating of “Hold” from Brokerages – MarketBeat (Dec 13, 2025)
- Scan your water bill at Walmart: new ways struggling families get help – Stock Titan (Dec 16, 2025)
- Pennsylvania American Water Proudly Recognizes American Water Charitable Foundation 2025 Workforce Readiness Grantees Recipients – Finviz (Dec 15, 2025)
For more information about American Water Works Company, Inc., please visit the official website: amwater.com
