American Water Works Company (AWK) Could Be 3% Undervalued After $64.1 Million Funding Win

Pennsylvania American Water, a subsidiary of American Water Works Company (AWK), recently secured more than $64.1 million in PENNVEST grants and low interest loans to fund water infrastructure projects across three Pennsylvania counties.

See our latest analysis for American Water Works Company.

Recent approvals for rate adjustments and the long term capital plan have coincided with a 7.73% 1 month share price return for American Water Works Company. However, the 1 year total shareholder return has declined 2.97%, suggesting momentum is improving from a weaker longer term base.

If this kind of regulated utilities story interests you, it may be worth widening your search using our screener to find 33 power grid technology and infrastructure stocks

After a 7.73% 1 month gain, American Water Works Company now sits close to some fair value estimates yet below others. So how should you read the gap between the current US$135.11 price and that US$130 to US$155 range?

Most Popular Narrative: 2.6% Undervalued

At $135.11, American Water Works Company sits a little below the most widely followed fair value estimate of $138.73, which is based on detailed long term forecasts and a 7.11% discount rate.

Heightened regulatory and societal focus on water quality and infrastructure modernization is accelerating rate case approvals and driving significant capital investment (e.g., $3.3 billion capital spend in 2025, requests for $111 million cumulative rate increases in CA by 2029). These factors enable predictable, above-inflation rate increases and support sustainable earnings expansion.

Read the complete narrative. Read the complete narrative.

Want to understand why this fair value sits above today’s price? The narrative leans heavily on steady revenue expansion, firmer margins and a richer future earnings multiple. The interesting part is how those pieces are combined, and which assumption carries the most weight.

Result: Fair Value of $138.73 (UNDERVALUED)

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

However, the American Water Works Company story also depends on timely rate approvals and effective cost control, with higher financing needs and rising operating expenses remaining potential pressure points.

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

Another View On American Water Works Company’s Valuation

Analysts see American Water Works Company as slightly undervalued at $135.11 versus a $138.73 fair value. However, the SWS DCF model paints a stricter picture, with an estimated future cash flow value of $111.52, suggesting the stock trades above that cash flow based view.

With one method pointing to a 2.6% discount to fair value and another implying the price sits well above its cash flow estimate, which lens do you trust more when judging what you are really paying for future growth?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out American Water Works Company for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 47 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Mixed messages in the American Water Works Company story so far? Take a closer look at the figures, weigh the risks against the potential rewards, and then check the 3 key rewards and 2 important warning signs

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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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