Analyzing Middlesex Water (NASDAQ:MSEX) and American Water Works (NYSE:AWK)

American Water Works (NYSE:AWK) and Middlesex Water (NASDAQ:MSEX) are both utilities companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, profitability, dividends, institutional ownership, valuation, analyst recommendations and earnings.

Profitability

This table compares American Water Works and Middlesex Water’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
American Water Works	21.26%	10.14%	3.19%
Middlesex Water	24.50%	10.08%	3.69%

Volatility and Risk

American Water Works has a beta of 0.56, meaning that its share price is 44% less volatile than the S&P 500. Comparatively, Middlesex Water has a beta of 0.71, meaning that its share price is 29% less volatile than the S&P 500.

Earnings and Valuation

This table compares American Water Works and Middlesex Water”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
American Water Works	$5.14 billion	5.74	$1.11 billion	$5.77	25.70
Middlesex Water	$194.69 million	5.81	$42.82 million	$2.77	21.33

American Water Works has higher revenue and earnings than Middlesex Water. Middlesex Water is trading at a lower price-to-earnings ratio than American Water Works, indicating that it is currently the more affordable of the two stocks.

Dividends

American Water Works pays an annual dividend of $3.58 per share and has a dividend yield of 2.4%. Middlesex Water pays an annual dividend of $1.44 per share and has a dividend yield of 2.4%. American Water Works pays out 62.0% of its earnings in the form of a dividend. Middlesex Water pays out 52.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. American Water Works has raised its dividend for 18 consecutive years and Middlesex Water has raised its dividend for 52 consecutive years. Middlesex Water is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

86.6% of American Water Works shares are owned by institutional investors. Comparatively, 79.5% of Middlesex Water shares are owned by institutional investors. 0.1% of American Water Works shares are owned by company insiders. Comparatively, 1.9% of Middlesex Water shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for American Water Works and Middlesex Water, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
American Water Works	1	6	2	0	2.11
Middlesex Water	0	2	0	1	2.67

American Water Works presently has a consensus target price of $137.88, suggesting a potential downside of 7.03%. Middlesex Water has a consensus target price of $60.75, suggesting a potential upside of 2.83%. Given Middlesex Water’s stronger consensus rating and higher probable upside, analysts clearly believe Middlesex Water is more favorable than American Water Works.

Summary

Middlesex Water beats American Water Works on 11 of the 18 factors compared between the two stocks.

About American Water Works

American Water Works Company, Inc., through its subsidiaries, provides water and wastewater services in the United States. It offers water and wastewater services to approximately 1,700 communities in 14 states serving approximately 3.5 million active customers. The company serves residential customers; commercial customers, including food and beverage providers, commercial property developers and proprietors, and energy suppliers; fire service and private fire customers; industrial customers, such as large-scale manufacturers, mining, and production operations; public authorities comprising government buildings and other public sector facilities, such as schools and universities; and other utilities and community water and wastewater systems. It also provides water and wastewater services on military installations; and undertakes contracts with municipal customers, primarily to operate and manage water and wastewater facilities, as well as offers other related services. In addition, the company operates approximately 80 surface water treatment plants; 540 groundwater treatment plants; 175 wastewater treatment plants; 53,700 miles of transmission, distribution, and collection mains and pipes; 1,200 groundwater wells; 1,700 water and wastewater pumping stations; 1,100 treated water storage facilities; and 74 dams. The company was founded in 1886 and is headquartered in Camden, New Jersey.

About Middlesex Water

Middlesex Water Company owns and operates regulated water utility and wastewater systems. It operates in Regulated and Non-Regulated segments. The Regulated segment collects, treats, and distributes water on a retail and wholesale basis to residential, commercial, industrial, and fire protection customers, as well as provides regulated wastewater systems in New Jersey and Delaware. The Non-Regulated segment provides non-regulated contract services for the operation and maintenance of municipal and private water and wastewater systems in New Jersey and Delaware. Middlesex Water Company was incorporated in 1896 and is headquartered in Iselin, New Jersey.