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Water is the lifeblood of communities, and American Water Works Company, Inc. ensures its steady flow to millions across the United States. As the largest publicly traded water and wastewater utility, AWK stands out for its extensive infrastructure and commitment to reliable, high-quality service. Its leadership in regulated water utilities reflects solid innovation and operational excellence. Yet, as the industry evolves, I ask: does American Water Works’ current valuation fully capture its growth and resilience potential?
Table of contents
Business Model & Company Overview
American Water Works Company, Inc., founded in 1886 and headquartered in Camden, New Jersey, stands as a dominant player in the regulated water industry. It operates a vast ecosystem of water and wastewater services, serving approximately 3.4M active customers across 1,700 communities in 14 states. This comprehensive network includes residential, commercial, industrial, and public sector clients, supported by extensive infrastructure like 80 surface water treatment plants and 52,500 miles of mains and pipes.
The company’s revenue engine is driven by its regulated utility model, combining recurring service fees with strategic infrastructure management. With operations spanning 24 states and serving around 14M people, American Water balances capital-intensive assets with steady cash flows. Its economic moat lies in the critical nature of its services and the high barriers to entry, positioning it as a key shaper of the U.S. water utility landscape.
Financial Performance & Fundamental Metrics
This section analyzes American Water Works Company, Inc.’s income statement, key financial ratios, and dividend payout policy to assess its overall financial health and investment potential.
Income Statement
The following table summarizes key income statement figures for American Water Works Company, Inc. (ticker: AWK) from fiscal years 2020 through 2024.
| 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 |
Income Statement Evolution
Between 2020 and 2024, American Water Works Company, Inc. (AWK) exhibited consistent revenue growth, rising by 24% overall and 10.63% in the last year alone. Net income expanded even more strongly, with a 48.24% increase over the period, though net margin growth was milder at 19.53%. Gross and EBIT margins remained favorable, reflecting stable profitability amid expanding revenues.
Is the Income Statement Favorable?
The 2024 income statement confirms generally favorable fundamentals for AWK, with a gross margin of 60.33% and an EBIT margin of 40.18%. Net margin stood at 22.44%, showing modest growth and supporting solid bottom-line performance. However, a relatively high interest expense ratio of 11.17% marks a cautionary factor. Overall, 85.71% of key income statement metrics are favorable, indicating a strong operating profile despite some financial costs.
Financial Ratios
The following table presents key financial ratios for American Water Works Company, Inc. (AWK) over the last five fiscal years, offering insights into profitability, liquidity, leverage, and valuation metrics:
| Ratios | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net Margin | 19% | 32% | 22% | 22% | 22% |
| ROE | 11% | 17% | 11% | 10% | 10% |
| ROIC | 4.1% | 3.7% | 3.9% | 4.1% | 4.3% |
| P/E | 39.2 | 27.2 | 33.8 | 27.0 | 23.1 |
| 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 | 45% | 42% | 45% | 41% | 43% |
| 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% |
Evolution of Financial Ratios
Between 2020 and 2024, American Water Works Company, Inc. saw a decline in its Return on Equity (ROE) from 11.0% to 10.2%, indicating slight weakening in profitability. The Current Ratio dropped significantly from 0.66 to 0.39, suggesting reduced short-term liquidity. Meanwhile, the Debt-to-Equity Ratio decreased from 1.71 in 2020 to 1.37 in 2024, reflecting a modest improvement in leverage management.
Are the Financial Ratios Favorable?
In 2024, profitability showed mixed signals: the net margin was favorable at 22.4%, while ROE and return on invested capital (ROIC) were neutral to unfavorable. Liquidity ratios, including the current and quick ratios, were unfavorable, indicating potential short-term financial stress. Leverage ratios such as debt-to-equity were also unfavorable, but the interest coverage ratio was neutral. Market valuation ratios like P/E and P/B were neutral, and the dividend yield was favorable. Overall, the financial ratios present a slightly unfavorable profile for the company.
Shareholder Return Policy
American Water Works Company, Inc. maintains a consistent dividend payout with a ratio around 55%, and a dividend yield near 2.4% as of 2024. Despite regular dividends, free cash flow per share remains negative, signaling potential pressure on cash resources to sustain distributions. The company does not currently engage in share buybacks.
The steady dividend payments supported by net income suggest a focus on shareholder income, but negative free cash flow and modest coverage ratios point to risks if cash generation weakens. This distribution approach appears aimed at balancing shareholder returns and operational reinvestment, though sustainability depends on future cash flow improvements.
Score analysis
The following radar chart illustrates the key financial scores for American Water Works Company, Inc., highlighting various valuation and performance metrics:
American Water Works shows favorable scores in discounted cash flow (4), return on equity (4), and return on assets (4), indicating solid profitability and valuation. However, debt-to-equity (2), price-to-earnings (2), and price-to-book (2) scores remain moderate, reflecting some caution on leverage and market valuation.
Analysis of the company’s bankruptcy risk
The Altman Z-Score places the company in the distress zone, indicating a higher risk of financial distress and potential bankruptcy:
Is the company in good financial health?
The Piotroski Score diagram below provides insight into the company’s financial strength and stability:
With a Piotroski Score of 6, American Water Works demonstrates average financial health, suggesting moderate strength in profitability, leverage, and operational efficiency metrics.
Competitive Landscape & Sector Positioning
This sector analysis will explore American Water Works Company, Inc.’s strategic positioning, revenue segments, key products, main competitors, competitive advantages, and SWOT profile. I will assess whether the company holds a competitive advantage over its industry peers.
Strategic Positioning
American Water Works Company, Inc. maintains a concentrated product portfolio focused on regulated water and wastewater services, generating $4.3B in 2024, complemented by smaller market-based businesses at $388M. Its geographic exposure spans 24 U.S. states, serving 3.4M customers across 1,700 communities.
Revenue by Segment
This pie chart illustrates American Water Works Company, Inc.’s revenue distribution by segment for the fiscal year 2024, highlighting the contributions of its Regulated and Market Based Businesses.
In 2024, the Regulated Business remains the dominant revenue driver with $4.3B, showing steady growth from $2.6B in 2013, reflecting consistent expansion. Market Based Businesses, at $388M, contribute a smaller but fluctuating share, with a notable dip compared to 2021’s $563M. The company’s revenue concentration in regulated operations suggests stability, though the slower growth in Market Based Business signals cautious risk management.
Key Products & Brands
The table below outlines American Water Works Company, Inc.’s main products and brands along with their descriptions:
| Product | Description |
|---|---|
| Regulated Business | Provides water and wastewater services to residential, commercial, industrial, public sector, and other customers across 14 states. |
| Market Based Businesses | Offers additional water-related services mainly through contracts with municipal customers and operates water and wastewater facilities. |
American Water Works focuses primarily on regulated water and wastewater services, serving approximately 3.4M active customers in 14 states. Its market-based segment complements this with facility operations and related services.
Main Competitors
There are 34 competitors in the Regulated Water industry, with the table below listing the top 10 leaders by market capitalization:
| Competitor | Market Cap. |
|---|---|
| GE Vernova Inc. | 184B |
| NextEra Energy, Inc. | 169B |
| Constellation Energy Corporation | 114B |
| The Southern Company | 96B |
| Duke Energy Corporation | 91B |
| American Electric Power Company, Inc. | 62B |
| Sempra | 59B |
| Vistra Corp. | 56B |
| Dominion Energy, Inc. | 51B |
| Exelon Corporation | 44B |
American Water Works Company, Inc. ranks 23rd among 34 competitors in the sector. Its market cap is about 13.7% of the largest competitor, GE Vernova Inc. The company is positioned below both the average market cap of the top 10 competitors (92.6B) and the median market cap of the sector (29.6B). It maintains a narrow 2.57% distance to the next competitor above, indicating a close competitive proximity.
Comparisons with competitors
Check out how we compare the company to its competitors:
Does AWK have a competitive advantage?
American Water Works Company, Inc. currently shows a slightly unfavorable competitive advantage as its return on invested capital (ROIC) is below its weighted average cost of capital (WACC), indicating value destruction despite a growing ROIC trend. The company demonstrates favorable income statement margins and solid revenue and profit growth, but its interest expense remains relatively high.
Looking ahead, AWK operates extensive water infrastructure across multiple states, serving millions of customers, which may provide opportunities for expansion and operational efficiency. Continued growth in profitability and potential market developments could influence its competitive position in the regulated water industry.
SWOT Analysis
This SWOT analysis highlights key factors affecting American Water Works Company, Inc. to guide investment decisions.
Strengths
- strong revenue growth (10.6% in 1 year)
- favorable gross and EBIT margins (60.3%, 40.2%)
- stable dividend yield (2.41%)
Weaknesses
- low liquidity ratios (current 0.39, quick 0.35)
- high debt-to-equity ratio (1.37)
- ROIC below WACC indicating value destruction
Opportunities
- expanding service to 14 states and 3.4M customers
- infrastructure upgrades and modernization
- increased demand for sustainable water solutions
Threats
- regulatory risks in the utilities sector
- rising interest expenses (11.2%)
- competition from alternative water providers and technologies
Overall, American Water Works demonstrates solid profitability and growth but struggles with liquidity and returns on capital. The company’s strategy should focus on improving operational efficiency and managing debt while capitalizing on growth in water infrastructure and sustainability trends.
Stock Price Action Analysis
The weekly stock chart for American Water Works Company, Inc. (AWK) over the past 12 months shows price movements and trend shifts as follows:
Trend Analysis
Over the past 12 months, AWK’s stock price increased by 8.38%, indicating a bullish trend with deceleration. The price ranged between 116.57 and a high of 148.4, with a volatility level reflected by an 8.7 standard deviation. Recent weeks show a slight decline of 0.86%, suggesting a neutral to mildly negative short-term slope.
Volume Analysis
In the last three months, total trading volume has been increasing with a slight buyer dominance at 51.59%. Buyer volume remains neutral in behavior, indicating balanced market participation and cautious investor sentiment without clear directional conviction.
Target Prices
Analysts provide a clear consensus on American Water Works Company, Inc. target prices, reflecting moderate upside potential.
| Target High | Target Low | Consensus |
|---|---|---|
| 149 | 122 | 139.5 |
The target prices suggest that analysts expect the stock to trade between $122 and $149, with a consensus price near $139.5, indicating steady confidence in the company’s valuation.
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Analyst & Consumer Opinions
This section examines the recent analyst ratings and consumer feedback regarding American Water Works Company, Inc. (AWK).
Stock Grades
Here is the latest overview of American Water Works Company, Inc. stock grades from recognized financial institutions:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Wells Fargo | Maintain | Equal Weight | 2026-01-20 |
| B of A Securities | Upgrade | Neutral | 2026-01-12 |
| Barclays | Maintain | Underweight | 2025-12-17 |
| 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 |
The consensus trends toward a Hold rating with a balanced mix of Buy and Hold grades, while some firms maintain a cautious stance with Underweight or Equal Weight ratings, reflecting moderate investor confidence.
Consumer Opinions
Consumers generally express a balanced mix of satisfaction and concern regarding American Water Works Company, Inc., reflecting a nuanced view of its services.
| Positive Reviews | Negative Reviews |
|---|---|
| Reliable water supply with consistent quality. | Customer service can be slow to respond. |
| Transparent billing and reasonable pricing. | Occasional water quality issues reported. |
| Strong community involvement and environmental efforts. | Limited online account management features. |
Overall, customers appreciate American Water Works for its dependable water service and fair pricing, while commonly noting room for improvement in customer support and digital service tools.
Risk Analysis
Below is a summary table of key risks associated with American Water Works Company, Inc., highlighting their likelihood and potential impact:
| Category | Description | Probability | Impact |
|---|---|---|---|
| Financial Health | Company is in the Altman Z-Score distress zone, indicating risk of financial distress. | High | High |
| Liquidity Risk | Unfavorable current and quick ratios (0.39 and 0.35) suggest tight liquidity. | Medium | Medium |
| Leverage Risk | Debt to equity ratio of 1.37 is unfavorable, increasing financial risk. | Medium | Medium |
| Operational Risk | Low asset turnover ratios (0.14) may limit growth potential and operational efficiency. | Medium | Medium |
| Market Volatility | Beta of 0.754 indicates moderate sensitivity to market fluctuations. | Low | Low |
| Regulatory Risk | Being a regulated water utility, changes in regulations could impact profitability. | Medium | High |
The most critical risks for American Water Works are its financial distress signals from the Altman Z-Score and liquidity constraints, which could affect its ability to meet short-term obligations. Additionally, regulatory changes remain a significant factor due to the company’s heavily regulated sector. Investors should monitor these risks closely while considering the company’s overall moderate Piotroski score and stable dividend yield.
Should You Buy American Water Works Company, Inc.?
American Water Works Company, Inc. appears to be in financial distress with a leverage profile that could be seen as substantial, while operational efficiency shows improving profitability. Despite a slightly unfavorable moat, the company’s overall rating is a very favorable B+, suggesting a moderate investment profile.
Strength & Efficiency Pillars
American Water Works Company, Inc. exhibits solid profitability metrics, supported by a net margin of 22.44% and a stable return on equity of 10.17%. While its return on invested capital (ROIC) stands at 4.26%, falling short of the weighted average cost of capital (WACC) at 5.83%, the company shows improving profitability trends. Financial health signals are mixed: the Altman Z-Score of 1.03 places it in the distress zone, indicating elevated bankruptcy risk, whereas the Piotroski Score of 6 suggests average financial strength. Overall, the company maintains operational efficiency but is currently a value shedder.
Weaknesses and Drawbacks
The company faces notable challenges in leverage and liquidity, with a debt-to-equity ratio of 1.37 reflecting significant leverage, and a current ratio of 0.39 signaling potential short-term liquidity constraints. Valuation metrics appear moderate, with a price-to-earnings ratio of 23.1 and price-to-book ratio of 2.35, suggesting the stock is neither undervalued nor excessively expensive but may lack a margin of safety. Operational efficiency concerns arise from low asset turnover at 0.14 and fixed asset turnover of 0.17, which could pressure future returns. These factors introduce risks amid the company’s ongoing financial pressures.
Our Verdict about American Water Works Company, Inc.
American Water Works Company, Inc. presents a fundamentally mixed profile with moderate profitability and financial health concerns. The overall bullish long-term trend is accompanied by a recent slight price decline of -0.86%, yet buyer dominance remains neutral at 51.59%. Despite the company’s moderate value creation challenges and financial risks, the profile may appear attractive for investors seeking exposure to a company with improving profitability trends, though a cautious, wait-and-see approach could be prudent given near-term uncertainties.
Disclaimer: This content is for informational purposes only and does not constitute financial, investment, or other professional advice. Investing in financial markets involves a significant risk of loss, and past performance is not indicative of future results.
Additional Resources
- New Jersey American Water Readies for Winter Storm – Finviz (Jan 23, 2026)
- Assessing American Water Works Company (AWK) Valuation As Shares Trade Sideways With Mixed Recent Returns – Yahoo Finance (Jan 23, 2026)
- American Water Works Company, Inc. $AWK Shares Purchased by Middleton & Co. Inc. MA – MarketBeat (Jan 21, 2026)
- American Water’s 2025 Year-End Conference Call Scheduled for February 19, 2026 – yourwyominglink.com (Jan 21, 2026)
- American Water Works (AWK) Price Target Lowered by Wells Fargo | AWK Stock News – GuruFocus (Jan 20, 2026)
For more information about American Water Works Company, Inc., please visit the official website: amwater.com
