Value
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.9 |
| P/S | 6.6 |
| EV/EBITDA | 2.7 |
| Fwd P/E | 5.8 |
| PEG | 4.0 |
| Analyst target | 3.0 |
- ▸Forward P/E: 22.4x
- ▸PEG: 2.56
AWK · Why this verdict
Why American Water Works Company, I (AWK) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictSELL
Overall score4.7/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
American Water Works is a regulated water utility with strong 21% margins and strong momentum, but the price of $144.37 is 15.0% above the $122.75 analyst target and cash flow is deeply negative against earnings. It missed EPS in 3 of the last 4 quarters and sits near its 52-week high.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Earnings quality shows a red flag of -144% FCF/NI, meaning heavy investment spending consumes more cash than the business earns. Quality breakdown | Free cash flow should improve toward breakeven as capital spending moderates or rate recovery catches up. | ↓Deteriorating |
| CounterNegative free cash flow is normal for a utility investing in regulated rate base, and that spending grows future allowed earnings. | ||
As a regulated water utility, American Water earns strong margins of 21% with operating and net margin components at the maximum 10/10 and a sector tailwind of +1.0. Quality breakdown | Margins should hold near 21% as rate cases keep pace with costs over 12 months. | ↓Deteriorating |
| CounterThe business has no competitive moat, ROE scores only 3.3/10, and regulated returns are capped by rate-case outcomes. | ||
The price of $144.37 is 15.0% above the $122.75 analyst target, with 12.5% downside to the stop, a negative reward-to-risk of -1.2. Estimated upside | Price should converge toward the analyst target, or analysts should raise targets above $140. | ↓Deteriorating |
| CounterUtilities are bid as defensive assets and strong momentum could persist, pushing analysts to chase the price higher. | ||
The company missed EPS estimates in 3 of the last 4 quarters, including a 1.76% miss in the latest report, with an average surprise of -1.87%. Miss count | EPS surprises should return to positive territory by the report due 2027-02-17. | ↓Deteriorating |
| CounterMisses are small (under 8%) and utility earnings are seasonal and weather-driven, so surprise noise may not reflect real weakness. | ||
RSI is overbought at 78 and price is only 1.5% from its 52-week high, though on-balance volume is still rising and price is above its 200-day average. Momentum breakdown | RSI should cool below 65 while price holds above its 200-day average. | ↑Improving |
| CounterMACD and on-balance volume both score the maximum 10, so broad buying could carry the stock above its prior high. | ||
Earnings quality shows a red flag of -144% FCF/NI, meaning heavy investment spending consumes more cash than the business earns.
↓DeterioratingQuality breakdown
- Expectation
- Free cash flow should improve toward breakeven as capital spending moderates or rate recovery catches up.
CounterNegative free cash flow is normal for a utility investing in regulated rate base, and that spending grows future allowed earnings.
As a regulated water utility, American Water earns strong margins of 21% with operating and net margin components at the maximum 10/10 and a sector tailwind of +1.0.
↓DeterioratingQuality breakdown
- Expectation
- Margins should hold near 21% as rate cases keep pace with costs over 12 months.
CounterThe business has no competitive moat, ROE scores only 3.3/10, and regulated returns are capped by rate-case outcomes.
The price of $144.37 is 15.0% above the $122.75 analyst target, with 12.5% downside to the stop, a negative reward-to-risk of -1.2.
↓DeterioratingEstimated upside
- Expectation
- Price should converge toward the analyst target, or analysts should raise targets above $140.
CounterUtilities are bid as defensive assets and strong momentum could persist, pushing analysts to chase the price higher.
The company missed EPS estimates in 3 of the last 4 quarters, including a 1.76% miss in the latest report, with an average surprise of -1.87%.
↓DeterioratingMiss count
- Expectation
- EPS surprises should return to positive territory by the report due 2027-02-17.
CounterMisses are small (under 8%) and utility earnings are seasonal and weather-driven, so surprise noise may not reflect real weakness.
RSI is overbought at 78 and price is only 1.5% from its 52-week high, though on-balance volume is still rising and price is above its 200-day average.
↑ImprovingMomentum breakdown
- Expectation
- RSI should cool below 65 while price holds above its 200-day average.
CounterMACD and on-balance volume both score the maximum 10, so broad buying could carry the stock above its prior high.
Per-dimension breakdown
Quality
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.3 |
| ROA | 2.3 |
| Gross margin | 8.4 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 1.6 |
| FCF quality | 0.0 |
| Moat | 5.2 |
| Piotroski F | 6.7 |
- ▸Strong margins: 21%
- ▸Earnings quality RED FLAG: -144% FCF/NI
- ▸No competitive moat
Growth
2.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.5 |
| EPS growth | 2.0 |
Momentum
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.2 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 4.1 |
- ▸Overbought (RSI 76)
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.5 |
| Analyst rating | 5.0 |
| Price target | 4.5 |
Insider
6.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 7.0 |
| notable moves | 7.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
2.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.1 |
| quality rank | 5.6 |
| growth rank | 3.3 |
Technical
4.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.3 |
| support resistance | 0.8 |
| 52w position | 9.8 |
Risk (lower is worse)
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 5.5 |
| days to cover | 2.9 |
| volatility | 6.6 |
| put call | 10.0 |
| implied vol | 6.7 |
| max pain risk | 3.0 |
| beta | 9.7 |
| debt equity | 4.2 |
- ▸Above max pain $90
Catalyst
3.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 1.6 |
| dividend safety | 6.0 |
| news activity | 5.0 |
- ▸Earnings concerns: 1B/3M
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:7.5>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:106d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-1.2=NEGATIVE
Warning (0)
none
Reward-to-Risk
-1.18
Upside
-16.2%
Downside
13.7%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.7 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Momentum at 7.5) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-1.2=NEGATIVE) reinforce the read. Current asymmetry R:R is -1.18 — supplementary context, not the trigger for this path.
The strongest dimensions are Momentum at 7.5, Insider at 6.3, and Risk (lower is worse) at 6.1; the weakest are Peer rank at 2.5, Growth at 2.8, and Catalyst at 3.8. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -1.18 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Regulated Utility Strong Margins
Trip ifNet margin falls below 15% from current level above 20%.
- P2Negative Free Cash Flow Capex
Trip ifFree cash flow to net income conversion exceeds 0% from current -144%.
- P3Price Well Above Analyst Target
Trip ifPrice stays more than 10% above the analyst target from current 15.0% above.
- P4Repeated Earnings Misses
Trip ifEPS surprise exceeds 0% for 2 consecutive quarters.
- P5Overbought Near 52 Week High
Trip ifRSI falls below 50 from current 78 while price drops below the 200-day average.