American Water Works Company, Inc. (NYSE:AWK): What Does The Future Look Like?

After American Water Works Company, Inc.’s (NYSE:AWK) earnings announcement in December 2018, analysts seem fairly confident, as a 15% increase in profits is expected in the upcoming year, relative to the past 5-year average growth rate of 4.6%. Currently with trailing-twelve-month earnings of US$567m, we can expect this to reach US$650m by 2020. Below is a brief commentary around American Water Works Company’s earnings outlook going forward, which may give you a sense of market sentiment for the company. Investors wanting to learn more about other aspects of the company should research its fundamentals here.

Check out our latest analysis for American Water Works Company

Exciting times ahead?

Longer term expectations from the 14 analysts covering AWK’s stock is one of positive sentiment. Since forecasting becomes more difficult further into the future, broker analysts generally project out to around three years. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.

NYSE:AWK Past and Future Earnings, March 25th 2019
NYSE:AWK Past and Future Earnings, March 25th 2019

This results in an annual growth rate of 9.5% based on the most recent earnings level of US$567m to the final forecast of US$771m by 2022. EPS reaches $4.17 in the final year of forecast compared to the current $3.15 EPS today. With a current profit margin of 16%, this movement will result in a margin of 19% by 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For American Water Works Company, I’ve compiled three relevant factors you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Future Earnings: How does American Water Works Company’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of American Water Works Company? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.