Water stocks help investors focus on one of the most fundamental aspects of life on Earth. All organisms, including humans, need water to stay alive. It is reported that water makes up about 70% of human body weight.
Water and power are also critical in keeping the world’s economies growing and producing. But water is becoming increasingly scarce, and expensive. And power, especially in the form of coal- and petroleum-derived power, has escalated in price, and the supplies of oil, coal and gas have become increasingly uncertain.
We are seeing historic droughts in California. And Nevada last year passed a law to conserve water because of the drought that was drying up the Colorado River. So, the problem is both of finding more water, and being more ecologically friendly and sustainable with their sources.
And this creates an opportunity for water stocks, especially, to perform well.
Also, last year the Infrastructure Investment & Jobs Act was passed, providing about $1.2 trillion for the nation’s infrastructure. In this bill, about $51 billion is earmarked for water-based uses, creating substantial financing for water stocks to grow their activities.
Following is a list of some of the most promising water stocks and ecologically-friendly stocks that could do well and should be looked at as buy candidates.
|AWR||American States Water Company||$81.89|
|CWT||California Water Service Group||$55.19|
|ARTNA||Artesian Resources Corporation||$49.76|
|GWRS||Global Water Resources||$13.65|
Mueller Industries (MLI)
Mueller Industries (NASDAQ:MLI) released its first-quarter 2022 earnings in April, reporting $2.78 per share, more than double its $1.11 in earnings in the same period last year.
According to Marketbeat.com, MLI made $9.92 per share over the last year, and is selling at a price/earnings ratio of 5.3 times. That’s low for a company that has good earnings increases, and it makes MLI one of the water stocks to consider buying.
Mueller makes products out of base metals such as copper and brass, and has a climate business division. Most of the company’s business is in piping systems, making valves and fittings and other products. Its climate division works in water distribution, refrigeration, temperature control products, and more.
The company, through its piping systems, helps residential and commercial water flow systems, including drinking water in homes and oxygen lines in doctors’ offices.
Pentair (NYSE:PNR) announced its new Pentair Rocean Reservoir in April — a water filtration system that can sit on your kitchen counter. The system is ” certified to reduce or remove 76 contaminants” without a lot of clutter. Pentair claims this will help address the problem of plastic water bottles while giving consumers cleaner water at home.
Pentair claims that over the past 10 years “4 trillion plastic bottles have been consumed and disposed of, with over 1 billion plastic water bottles being sold of every day.”
The company provides water products and services worldwide, including drinking water filters and systems, water softening products, commercial water management and filtration, and other products and services.
PNR is expected to report its second-quarter 2022 earnings later in July, and the consensus of analysts reporting to TipRanks.com is for $1 in EPS, vs. last year’s 84 cents per share. PNR is one of the water stocks to keep a close eye on.
American States Water Company (AWR)
American States Water Company (NYSE:AWR) is a broad-based water and electric service company, serving commercial and residential customers. AWR buys, distributes, and sells water throughout the U.S., including maintaining and constructing water facilities.
American States Water serves over 1 million customers across nine states and has a water utility subsidiary that serves about 263,000 customers in 80 communities in parts of California. AWR also distributes water and offers wastewater collection on 11 military bases around the country.
Stockanalysis.com reports that eight analysts have given AWR a consensus buy rating with an average 12-month forecast of $85.68, an increase of over 8%. The analysts also forecast earnings per share of $2.63 this year, and an increase to $2.80 a share next year. AWR gives you exposure to one of the water stocks with further growth potential.
California Service Water Group (CWT)
California Service Water Group (NYSE:CWT) announced on June 22 that its subsidiary completed the acquisition of Railyard Utility’s wastewater system. Railyard Utility supplies water utility service in the Austin, Texas, metropolitan area. This acquisition adds about 345 customers to CWT and will add about 150 more when the surrounding community is completed.
CWT supplies more than 2 million people with water and wastewater services. It operates in California, Hawaii, New Mexico, Texas, and Washington. CWT is the third largest water utility in the U.S. and the largest west of the Mississippi River.
Three analysts at CNN Business have a 12-month mean target of CWT of $61, forecasting an increase of about 10.4% from its recent price. CWT could be bought now for exposure to water stocks, but short-term there doesn’t seem to be a compelling reason to buy. Investors should instead wait for a further pullback for an entry point.
Artesian Resources Corporation (ARTNA)
According to analysts who are reporting to Yahoo.com, Artesian Resources Corporation (NASDAQ:ARTNA) has good earnings growth in store. Last year ARTNA made $1.79 per share; this year the analysts are estimating the company will make $1.90 per share; next year the estimates are for the company to make $2.18 per share.
That makes Artesian one of the top water stocks to buy for further growth.
Artesian services customers in Pennsylvania, Maryland and Delaware, supplying water, wastewater removal and other services.
In addition to residential customers, ARTNA sells water to commercial, industrial, government and other utility customers. It also offers design and construction services, and services water utilities.
And when looking at companies with greener options, it is providing environmentally friendly wastewater solutions and alternative procedures that protect and conserve groundwater supplies.
Global Water Resources (GWRS)
Global Water Resources (NASDAQ:GWRS) has a strong buy rating at Zacks Investment Research, showing their faith in the company. Zacks estimates that Global will grow 15% a year for the next three to five years; Zacks also estimates the company growing 25% in the current year. This would be an impressive performance, the company growing at this rate.
Zacks also has a forward P/E ratio on the stock of about 69 times earnings, which is a high P/E, not leaving much room for earnings disappointments.
The industry, as discussed, does have a bright future. Demand for services such as water, electricity and gas do serve a basic need, and sales and earnings are not usually as volatile as in other sectors.
GWRS is down about 56% from its 52-week high and should appreciate over time. But investors must keep in mind that there is risk in this high-multiple stock, and make sure they can accept the risk before buying.
Xylem (NYSE:XYL) claims that the water situation is worsening around the world, and writes that “by 2025, 1.8 billion people will be living in countries or regions with absolute water scarcity.” XYL is a water technology company working globally and claiming that their mission is to solve water problems through their expertise and technology applications.
Xylem’s numbers are good: according to analysts reporting to Yahoo.com, XYL made $2.49 a share last year, and is estimated to make $2.57 a share this year and $3.22 a share next year.
Yahoo.com has its trailing price/earnings multiple at about 34x, which is high, giving the stock some downside risk, and showing that some of the upside earnings estimates have already been discounted in the market price. Still, for long-term holders, XYL gives good exposure to this sector and is one of the water stocks to consider buying.
On the date of publication, Max Isaacman did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.