Summary
- Increase in share price has outpaced growth.
- Pennsylvania rate case and People's acquisition give potential for the future.
- Is Aqua America attractive at current levels?
Current Situation
Aqua America (WTR) has had a fantastic run. They are up 43.90% during the past five years, mostly in line with the rest of the S&P 500 index as witnessed by the chart below. It does feel kind of strange, doesn't it? During one of the best economic cycles in recent history, an utility company operating mostly in regulated businesses can match the growth of the SP500?
(chart provided by yahoo finance)
Now let's look at the actual growth in term of revenue. (years 2014-2017 taken from Aqua America's 2017 annual report. Year 2018 taken from Aqua America's Q4 2018 press release.)
2018: $838.1 million
2017: $809.5 million
2016: $819.9 million
2015: $814.2 million
2014: $779.9 million
That is only 7.5% for the past five years combined. It's not horrible, the company is still growing and it is growing profitably, however it is definitely a slow growth rate. While we are not expecting spectacular growth from a regulated utility company I feel that we should be seeing a little more than this if we are to justify the current high valuation. The management is aware of this issue and we will take a look at their future plans a little later in the article.
