American States Water Co (AWR): what the price requires
At today's price, American States Water Co (AWR) is priced for +2.8% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-19 · Source: https://boothcheck.com/report/AWR
Headline
| Field | Value |
|---|---|
| Ticker | AWR |
| Company | American States Water Co |
| Current price | $85.13/sh |
| Composition | Water 71% / Electric 9% / Contracted Services 21% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 13.3% |
| Operating margin today | 31.6% |
| Margin compression implied | -18.3pp |
| Implied growth | 2.8% |
| Multiple paid | 20x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 7.4% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7.6pp.
Reconcile: at the x-ray's 9.3% required return this reads ~15.9%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.39σ |
| cohort percentile (of 72 peers) | 43 |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.00x | 5 | expensive |
| Earnings | 2.30x | 3 | expensive |
| Relative | 1.97x | 5 | expensive |
| Growth | 1.09x | 3 | expensive |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.7%); the inversion above states its own rate.
Per-Model Detail (n=16)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $15.16 | 5.62x | yes | FCF base $0.0B, growth 12% (input: historical growth), terminal g 4.0%, WACC 7.7%, 6yr projection |
| DCF Exit Multiple | Growth | $89.76 | 0.95x | yes | Exit EV/EBITDA: 13.8x / 15.8x / 17.8x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $71.26 | 1.19x | yes | P/E 20x (static sector reference · 2026-04), scenarios: 16.5x / 20.0x / 23.5x (bear / base = reference held flat / bull), EV/EBITDA 13x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $36.82 | 2.31x | yes | BV/sh $27.13, ROE (TTM) 12.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $42.58 | 2.00x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $78.13 | 1.09x | yes | Rev $0.7B, growth 12% (input: historical growth; tapered), Terminal P/S: 4.1x / 4.9x / 5.8x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $41.16 | 2.07x | yes | EPS $3.43, growth 5% (input: historical EPS growth), PEG=4.72 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $23.91 | 3.56x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.17B × (1−25%) / WACC 7.7% → EPV (no growth) |
| Residual Income | Asset | $43.78 | 1.94x | yes | BV $27.13 + 5yr PV of (ROE (TTM) 12.6% − Kₑ 9.3%) × BV; BV grows 8.2%/yr |
| Graham Number | Asset | $45.76 | 1.86x | yes | √(22.5 × EPS $3.43 × BVPS $27.13) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $66.32 | 1.28x | yes | EBITDA $0.26B × sector EV/EBITDA 13.0x |
| FCF Yield | Earnings | $0.01 | 8513.00x | yes | FCF $38.0M / Kₑ 9.3% — zero-growth perpetuity (excluded from median) |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $54.86 | 1.55x | yes | EPS $3.43 × (8.5 + 2×5.3%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $7.43 | 11.46x | yes | BV $27.13 × (ROIC 2.1% / WACC 7.7%) |
| P/Sales Sector | Relative | $43.31 | 1.97x | yes | Revenue $0.68B × sector P/S 2.5x |
| PEG Fair Value | Relative | $27.23 | 3.13x | yes | EPS $3.43 × (PEG 1.5 × growth 5.3% (input: historical EPS growth)) → PE 7.9x |
| Earnings Yield | Earnings | $37.08 | 2.30x | yes | EPS $3.43 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $772.2m |
| Net debt / NOPAT (after-tax) | 4.90x |
| Net debt / operating income (pre-tax) | 3.68x |
| Interest coverage | 4.4x |
| Share count CAGR (dilution) | 1.4% |
| Burning cash | no |
Bullet Takeaways
At $77.09 the price pays about 18x company-wide operating income, implying only roughly 0.7% operating growth a year for five years. The counterintuitive part: even at that near-zero implied growth, no valuation family reaches the price. It is rich on assets, earnings power, peers, and even forward growth.
The surprise resolves in the dividend and the contracted segment. American States Water has raised its dividend at an 8.5% compound rate over five years, above its 7% policy goal, and its military-base contracted-services arm adds a non-regulated, long-duration earnings stream the standard utility frames undervalue.
Q1 2026 beat: EPS of $0.76 up 8.6%, on revenue of $169.19 million well above the $152 million expected, helped by CPUC second-year rate increases. The regulated utilities plan $185 million to $225 million of 2026 infrastructure investment.
Bull Case
The surprising number is the dividend growth rate on a sleepy water utility: American States Water has compounded its dividend at 8.5% a year over the past five years, ahead of its own policy goal of above 7%, and it carries one of the longest uninterrupted dividend-increase records of any U.S. company. That is not what a no-growth business does. It is the signature of a regulated water utility whose rate base keeps expanding through approved capital investment, converting infrastructure spending into a durable, rising earnings and dividend stream.
The Q1 2026 result shows the engine. EPS of $0.76 beat the $0.74 forecast and rose 8.6% year over year, on revenue of $169.19 million that came in well above the roughly $152 million expected. Golden State Water, the regulated water segment, earned $0.55 a share, up from $0.52, with water operating revenues rising $11.1 million largely from CPUC-authorized second-year rate increases effective January 1, 2026. That is the regulated rate-case machine working exactly as designed, with approved increases flowing straight to earnings.
The overlooked piece is the contracted-services segment. Beyond regulated water and electric, American States Water operates water and wastewater systems on U.S. military bases under long-term, 50-year privatization contracts through its ASUS subsidiary. That is a non-regulated, inflation-indexed, multi-decade earnings stream with high renewal certainty, and the standard utility valuation frames lump it in with regulated operations and miss its duration. The FY2025 10-K details the segment structure, including how electric-segment equipment is presented net of contributions in aid of construction, the regulated-accounting plumbing behind a stable rate base. The regulated utilities plan $185 million to $225 million of infrastructure investment in 2026, the spending that drives the next leg of rate-base and dividend growth. For an investor buying decades of compounding income, the contracted-services optionality plus a sector-leading dividend record is value the price's low implied growth does not credit.
Bear Case
The cycle position is the problem: American States Water trades at a peak regulated-utility multiple at a point when its allowed returns and rate base have been freshly stepped up, and the price assumes that elevated valuation persists. At $77.09 (June 27, 2026) no valuation family reaches the quote. It is rich on assets, earnings power, peers, and even forward growth. The earnings-power value mark lands near $25, the two-stage DDM near $39, simple and two-stage excess return near $37 to $43, and ROIC-justified book near $8 because regulated accounting ROIC sits around 2.1% against a 7.6% WACC. When even the forward-growth frames fall short, the price is a bet beyond what any standard method supports, which for a slow-growing utility is a demanding place to start.
The sustainable-earnings question is real. Q1 2026 benefited from CPUC second-year rate increases that stepped up revenue, but rate-case uplifts are periodic, not recurring growth: once a new rate cycle is set, earnings grow only as the next capital program is approved and the next case is decided. The current revenue beat reflects a favorable point in that regulatory cadence rather than a permanently higher run rate. The market is paying about 18x operating income for a business whose structural organic growth, stripped of rate-case timing, is low single digits, which is why the implied operating growth solves near zero and the price still looks stretched against every frame.
Leverage and rate sensitivity complete the picture. Net debt is roughly $772 million against trailing operating income near $209 million, about 3.7x, with interest coverage near 4.5x. A water utility funds its rate base with debt, so a higher-for-longer rate environment raises financing costs while allowed returns reset only through the slow rate-case process. The contracted military-base business adds some non-regulated diversification, but it is a minority of earnings and does not offset the core's cyclicality in valuation. A small-cap utility priced at a premium to every conservative frame, dependent on continued favorable rate-case outcomes and a stable rate environment, is exposed if either the regulatory cadence or interest rates turn against it. The conservative methods, clustering well below the price, are the more honest read of the sustainable earnings power.
Valuation
Inverting the $77.09 price gives the anchor. At that level the market pays about 18x company-wide operating income, which under a 7.6% cost of capital and 4% terminal growth implies operating growth of only roughly 0.7% a year for five years. Each one-point change in the cost of capital moves the implied growth by about 7.4 points. The notable feature is that even at this near-zero implied growth, no valuation family reaches the price, so the characterization is that the price is rich across assets, earnings power, peers, and forward growth at once. The reverse-DCF range runs from a low near $90 to a base near $109, above the current price, reflecting the value of the regulated franchise and contracted-services duration the inversion captures.
The model X-ray shows the breadth of the premium. The closest frames are relative and growth: a relative P/E mark near $71 on a 20x sector median, a DCF exit-multiple near $83, and a discounted future market cap near $71. The conservative frames sit lower: earnings power value near $25, two-stage DDM near $39, simple excess return near $37, and ROIC-justified book near $8. The FCF-yield mark collapses toward zero because free cash flow is minimal in a heavy capital-investment phase, the spending that builds the rate base.
The spread is the information. The price is not a verdict on whether American States Water is a good utility, its quality and dividend record are exceptional. It is a measure of how much durable regulated compounding and contracted-services value the market has booked into a small-cap utility priced above every standard frame.
Catalysts
The near-term driver is the regulated rate cadence. Q1 2026 EPS of $0.76 beat and rose 8.6%, with Golden State Water revenue up $11.1 million largely from CPUC-authorized second-year rate increases effective January 1, 2026. The flow-through of approved rate increases and the timing of the next general rate case set the earnings path.
The capital program is the structural catalyst. The regulated utilities plan $185 million to $225 million of infrastructure investment in 2026, the spending that expands the rate base and supports continued earnings and dividend growth. American States Water has raised its dividend at an 8.5% compound rate over five years, above its 7% long-term policy goal, and dividend-increase announcements are a recurring catalyst.
The contracted-services segment is the optionality. The ASUS military-base water and wastewater operations run on long-term contracts, and new base awards or contract extensions add non-regulated, long-duration earnings. Watch rate-case filings and decisions at the CPUC, the pace of capital deployment, dividend actions, the interest-rate backdrop given net debt near $772 million, and any new military-base contract activity.
Sources: Investing.com and BusinessWire (AWR Q1 2026 results, $0.76 EPS beat, $169.19M revenue, Golden State Water $0.55 EPS and CPUC rate increases), Ticker Report and Barchart (earnings call highlights, 8.5% dividend CAGR, $185M to $225M 2026 capital plan).
Peer Cohorts (Per Segment, With Filing Citations)
Water (reported)
- AWK (AMERICAN WATER WORKS COMPANY, INC.)
- (no filing in the citation store)
- WTRG (Essential Utilities, Inc.)
- (no filing in the citation store)
- CWT (CALIFORNIA WATER SERVICE GROUP)
- (no filing in the citation store)
- HTO (H2O AMERICA)
- (no filing in the citation store)
Electric (reported)
- EIX (EDISON INTERNATIONAL)
- (no filing in the citation store)
- PCG (PG&E CORP)
- (no filing in the citation store)
- POR (PORTLAND GENERAL ELECTRIC COMPANY)
- (no filing in the citation store)
- PNW (PINNACLE WEST CAPITAL CORP)
- (no filing in the citation store)
- IDA (IDACORP INC)
- (no filing in the citation store)
- AVA (AVISTA CORP)
- (no filing in the citation store)
Contracted Services (reported)
- AWK (AMERICAN WATER WORKS COMPANY, INC.)
- (no filing in the citation store)
- CWT (CALIFORNIA WATER SERVICE GROUP)
- (no filing in the citation store)
- WTRG (Essential Utilities, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.