Analyzing American Water Works (NYSE:AWK) & Pennon Group (OTCMKTS:PEGRY)

Pennon Group (OTCMKTS:PEGRY) and American Water Works (NYSE:AWK) are both utilities companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, valuation, dividends, profitability, earnings, analyst recommendations and risk.

Analyst Ratings

This is a breakdown of current recommendations for Pennon Group and American Water Works, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pennon Group	0	0	0	0	N/A
American Water Works	2	3	2	0	2.00

American Water Works has a consensus target price of $140.29, indicating a potential downside of 4.70%. Given American Water Works’ higher probable upside, analysts plainly believe American Water Works is more favorable than Pennon Group.

Institutional and Insider Ownership

86.6% of American Water Works shares are held by institutional investors. 0.1% of American Water Works shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Pennon Group pays an annual dividend of $0.17 per share and has a dividend yield of 1.1%. American Water Works pays an annual dividend of $3.06 per share and has a dividend yield of 2.1%. Pennon Group pays out 29.4% of its earnings in the form of a dividend. American Water Works pays out 62.1% 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 17 consecutive years. American Water Works is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Pennon Group	N/A	N/A	N/A
American Water Works	21.93%	9.60%	3.12%

Valuation & Earnings

This table compares Pennon Group and American Water Works”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pennon Group	N/A	N/A	N/A	$0.58	27.91
American Water Works	$4.36 billion	6.58	$944.00 million	$4.93	29.86

American Water Works has higher revenue and earnings than Pennon Group. Pennon Group 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.

Summary

American Water Works beats Pennon Group on 12 of the 13 factors compared between the two stocks.

About Pennon Group

Pennon Group Plc provides clean water and wastewater services in the United Kingdom. It provides water and wastewater services for customers in Cornwall, Devon, and parts of Dorset and Somerset; water-only services in the areas of Dorset, Hampshire, and Wiltshire; and water and wastewater retail services to non-household customers in Great Britain. The company also offers regulated water to approximately 1.2 million customers in the Bristol region. Pennon Group Plc was incorporated in 1989 and is based in Exeter, the United Kingdom.

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.