Assessing American States Water's Valuation After Military Contract Pursuits and Major Infrastructure Investment Plans

American States Water (AWR) is expanding its footprint, actively seeking new long-term contracts with military bases and has announced plans to invest up to $210 million in infrastructure upgrades for 2025. This renewed momentum has caught the attention of investors as recent months have brought a slight uptick in analyst earnings estimates.

See our latest analysis for American States Water.

Recent optimism around contract wins and infrastructure investments has helped American States Water hold its ground, with shares closing at $74.03. Still, despite the renewed momentum, the stock’s one-year total shareholder return sits at -11.03%, and its three-year figure is down nearly 20%. Overall, short- and long-term performance has lagged the market. The latest news hints at potential for a turnaround as sentiment shifts.

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With shares trading below analyst targets and sentiment starting to shift, is American States Water a potential bargain for value seekers? Or has the market already factored in every bit of its future growth outlook?

Most Popular Narrative: 9% Undervalued

The most-followed narrative sees a fair value of $81.50 for American States Water, a level notably above the latest closing price of $74.03. Here is what could be fueling this view of upside potential, even as the company faces industry headwinds.

Robust infrastructure investment, with $170 to $210 million targeted for 2025 and rate base growth authorized by recent CPUC rate case decisions, positions the company to earn higher returns on a growing asset base, contributing to long-term increases in both revenue and potential net margins.

Read the complete narrative.

Imagine a future where American States Water secures outsized returns while expanding in California. The narrative hinges on the compounding effects of crucial financial assumptions and a profit margin target well above industry averages. Can this growth blueprint really justify such a premium? See the full breakdown behind these bullish expectations.

Result: Fair Value of $81.5 (UNDERVALUED)

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

However, regulatory uncertainty and rising supply costs could still challenge the growth story and impact the stability of American States Water's earnings in the future.

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

Another View: Market Multiples Signal Caution

While analyst models point to upside, a check against price-to-earnings tells a more cautious story. American States Water is trading at 22.1 times earnings, which is well above both the global water utilities average of 15.9 and its peers’ 18.4. The fair ratio is just 17.4, suggesting the market may be asking a premium not easily justified by fundamentals. Could this premium expose investors to downside if expectations are not met?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own American States Water Narrative

If you see things differently or enjoy diving into the data your own way, you can easily build your own narrative for American States Water in just a few minutes. Do it your way

A great starting point for your American States Water research is our analysis highlighting 3 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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