A Look at American Water Works Company’s Valuation Following Neosho Acquisition Deal

American Water Works Company (AWK) just made another major move, and investors should take notice. Its subsidiary, Missouri American Water, has reached an agreement to acquire the City of Neosho’s water and wastewater systems. The deal still hinges on approval from the Missouri Public Service Commission. If approved, this acquisition would expand American Water’s local footprint and include a commitment to invest around $35 million in improvements over the next five years. This aligns with the company’s strategy of growth through infrastructure and increased regional reach. This new deal comes at an interesting time for American Water Works Company. Over the past year, share price performance has been mixed, with some recent volatility and a moderate 10% gain since the start of the year. The long-term return picture is more nuanced, with a slight dip over the last year offset by steady gains across the three- and five-year marks. The company continues to roll out new programs, such as a recently launched high school internship initiative in Pennsylvania, all in keeping with its long-term focus on sustainable utility operations and talent development. As shares move in response to news like the Neosho acquisition, investors are left with the critical question: is there real value still on the table for AWK, or has the market already factored in its future growth?

Most Popular Narrative: 3% Undervalued

According to the most widely followed view, American Water Works Company is currently trading at a modest discount to fair value. This suggests slight undervaluation, but with a generally balanced outlook.

"Persistent population growth and urbanization across key U.S. states are fueling organic customer additions (for example, 2% customer growth target and multiple acquisitions adding approximately 87,000 connections). This underpins long-term revenue growth as American Water expands its service footprint and taps into rising water demand."

Curious why analysts value AWK just above the current share price? The narrative points to a growth engine powered by strategic expansion and rising demand, supported by positive projections on revenue and profitability. Want to see the bold forecast that sets this fair value apart? The details reveal some surprising assumptions you may want to review before making your next move.

Result: Fair Value of $141.11 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent cost increases or delays in regulatory approvals could quickly challenge analyst assumptions and put downward pressure on American Water’s growth outlook.

Find out about the key risks to this American Water Works Company narrative.

Another View: Are Shares Too Pricey?

While analysts say American Water Works Company looks modestly undervalued, our in-house SWS DCF model disagrees. It suggests the stock may be trading above its fair value based on future cash flows. Could market optimism be overdone?

Look into how the SWS DCF model arrives at its fair value.

Stay updated when valuation signals shift by adding American Water Works Company to your watchlist or portfolio. Alternatively, explore our screener to discover other companies that fit your criteria.

Build Your Own American Water Works Company Narrative

If you think there is another side to the story or would rather dive deeper into the numbers yourself, you can craft your own narrative in just a few minutes. Do it your way

A great starting point for your American Water Works Company research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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