Here's How Much You'd Have If You Invested $1000 in American Water Works a Decade Ago

For most investors, how much a stock's price changes over time is important. This factor can impact your investment portfolio as well as help you compare investment results across sectors and industries.

The fear of missing out, or FOMO, also plays a factor in investing, especially with particular tech giants, as well as popular consumer-facing stocks.

What if you'd invested in American Water Works (AWK) ten years ago? It may not have been easy to hold on to AWK for all that time, but if you did, how much would your investment be worth today?

American Water Works' Business In-Depth

With that in mind, let's take a look at American Water Works' main business drivers.

Water supply and wastewater service provider American Water Works Company was founded in 1886. The company provides essential water services to over 15 million customers in 47 states, the District of Columbia and Ontario, Canada. It has employee strength of 6,800. The company also intermittingly acquires small water service providers to expand its customer base. In 2020, the company added 37,800 water and wastewater customer connections through acquisitions.

American Water Works operates a large water and wastewater infrastructure to efficiently serve the expanding customer base in the United States. It operates 79 surface water treatment plants; 609 groundwater treatment plants; 150 wastewater treatment plants; 53,200 miles of transmission, distribution, and collection mains and pipes; 1,100 groundwater wells; 1,600 water and wastewater pumping stations; 1,300 treated water storage facilities; as well as 75 dams. The company has plans to invest $22-$25 billion of capital over the 2021-2030 time period to strengthen, and expand its water and wastewater infrastructure.

American Water Works Company primarily operates through the Regulated Businesses segment. The Regulated Businesses segment’s operating revenues were $3,255 million, $3,094 million and $2,984 million, accounting for 86%, 86% and 87% of the company’s total operating revenues in 2020, 2019 and 2018, respectively.

The company also has Market-Based Businesses. Through this business, the company provides services to military bases, municipalities, exploration and production companies, commercial, industrial and residential customers that are not subject to economic regulation by state PUCs and do not require substantial infrastructure investment. Market-based businesses’ operating revenues were $540 million in 2020, $539 million in 2019 and $476 million in 2018.

Other had a negative impact of $18 million on 2020 revenues.

At 2020-end, it provided water and wastewater services to 3,244,000 and 252,000 customers, respectively. The figures were higher than the 2019 level as the company expanded the customer base through acquisitions and organic growth during the period. At 2019-end, it provided water and wastewater services to 3,205,000 and 229,000 customers, respectively.

Bottom Line

Anyone can invest, but building a successful investment portfolio takes a combination of a few things: research, patience, and a little bit of risk. So, if you had invested in American Water Works a decade ago, you're probably feeling pretty good about your investment today.

According to our calculations, a $1000 investment made in June 2011 would be worth $5,586.92, or a gain of 458.69%, as of June 11, 2021, and this return excludes dividends but includes price increases.

In comparison, the S&P 500 gained 233.54% and the price of gold went up 19.10% over the same time frame.

Analysts are forecasting more upside for AWK too.

American Water Works’ is benefiting from new water rates and systematic expenditure to strengthen its water and wastewater infrastructure, which in turn will enable the company to provide efficient water as well as wastewater services to the expanding customer base. The company continues to expand operations through acquisitions and organic means. Efficient cost management is lowering operating expenses and boosting margins. It has ample liquidity to meet debt obligations. Shares of American Water Works have outperformed the industry in the past 12 months. However, fluctuating weather conditions, lower demand for water and the pandemic-led decline in demand will adversely impact profitability. Its operations are subject to stringent regulations, risk of accidents and contamination due to soiling of old pipelines.

Shares have gained 5.09% over the past four weeks and there have been 2 higher earnings estimate revisions for fiscal 2021 compared to none lower. The consensus estimate has moved up as well.
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