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Is American Water Works Company Inc (AWK) Stock Trading Below Fair Value?

Monday, May 16, 2022 01:41 PM | InvestorsObserver Analysts
Is American Water Works Company Inc (AWK) Stock Trading Below Fair Value?

American Water Works Company Inc (AWK) receives a weak valuation score of 14 from InvestorsObserver analysis. Our proprietary scoring system considers the overall health of the company by looking at the stock's price, earnings, and growth rate to determine if it represents a good value. AWK holds a better value than 14% of stocks at its current price. Investors who are focused on long-term growth through buy-and-hold investing will find the Valuation Rank especially relevant when allocating their assets.

Valuation Rank - 14
AWK gets a 14 Valuation Rank today. Find out what this means to you and get the rest of the rankings on AWK!

Metrics Analysis

AWK has a trailing twelve month Price to Earnings (PE) ratio of 20.7. The historical average of roughly 15 shows a poor value for AWK stock as investors are paying higher share prices relative to the company's earnings. AWK's high trailing PE ratio shows that the firm has been trading above its fair market value recently. Its trailing 12-month earnings per share (EPS) of 7.09 does not justify the stock's current price. However, trailing PE ratios do not factor in the company's projected growth rate, resulting in many newer firms having high PE ratios due to high growth potential enticing investors despite inadequate earnings.
AWK's 12-month-forward PE to Growth (PEG) ratio of 3.99 is considered a poor value as the market is overvaluing AWK in relation to the company's projected earnings growth due. AWK's PEG comes from its forward price to earnings ratio being divided by its growth rate. A PEG ratio of 1 represents a perfect correlation between earnings growth and share price. Due to their incorporation of more fundamentals of a company's overall health and focusing on the future rather than the past, PEG ratios are one of the most used valuation metrics by analysts today.

Summary

All together these valuation metrics paint a pretty poor picture for AWK at its current price due to a overvalued PEG ratio due to strong growth. The PE and PEG for AWK are worse than the average of the market resulting in a valuation score of 14. Click Here to get the full Report on American Water Works Company Inc (AWK) stock.

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