WTRG - Essential Utilities: A Quality Company With A Favorable Valuation

2024-05-05 09:43:38 ET

Summary

• Essential Utilities has had a long-term performance of 2,600% return since 1994, outperforming the S&P 500.
• The quality company is currently significantly discounted and therefore offers a good opportunity for value investors.
• Natural gas prices have a significant impact on Essential Utilities' revenue.
• Stable dividend growth will probably continue in the following years.

In terms of long-term performance, Essential Utilities ( WTRG ) has been a very successful company. An investor who had bought this company in 1994 would have a total return of 2,600% today, including dividends. In comparison, the total return of the S&P 500 index over the same period has been 1,044%. However, Essential Utilities is currently discounted for two reasons. First of all, this is due to high interest rates, which are especially effective for utility companies. Another reason is low natural gas prices, which are at their lowest levels in a decade. However, both interest rates and natural gas prices do not remain at the same level. If they reach their historical average, the WTRG share price will also start to rise significantly. Therefore, I think that at the moment this quality company is available at a good price for investors.

Company Overview

Essential Utilities is the second largest water and wastewater service provider in the US. In addition, natural gas distribution service is also offered to customers. The company has 3 business segments . They are Regulated Water segment, Regulated Natural Gas segment and Other segment. WTRG provides water, wastewater and natural gas services to approximately 5.5 million people in Pennsylvania, Ohio, Texas, Illinois, North Carolina, New Jersey, Indiana, Virginia and Kentucky. Much of the company's business is in Pennsylvania. Essential Utilities was founded in 1886 and its previous name before 2020 was Aqua America. Water services are offered under the Aqua brand and natural gas services under the Peoples brand. ...

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