Buffett Brain · Research note
Score updated 21 Oct 2026 · analysis from 26 Jul 2026
AWK· Utilities
American Water Works
American Water Works shows weak returns and high leverage, failing key Buffett criteria for a durable investment.
Buffett fit
Weak fit
Owner
38
Durability
56
Management
16
Price
28
Score updated 21 Oct 2026 · analysis from 26 Jul 2026
Buffett's checklist
Each number against Buffett's bar, and where it ranks among Utilities stocks in our database.
How much profit the business makes on each dollar invested in it. Higher is better.
What is left of each sale after the cost of making the product. A high number often means pricing power.
The cash the business earns for its owners, compared with the price of the whole company.
How fast sales grew each year over the last five years.
How many years of today's profit you pay for at today's price. Lower means cheaper.
How much the company owes compared with what it owns outright. Lower is safer.
The four pillars
How the business measures up on each of Buffett's four tests.
If I owned 100% of American Water Works, I would face challenges due to its 4.4% , which is below the 7.7% top-quintile sector cutoff.
The full reasoning comes with a free account.
The 10-year outlook is concerning due to the company's declining EPS CAGR of -4.8% and the potential for increased regulatory scrutiny.
The full reasoning comes with a free account.
With a share count CAGR of 1.74% and no , appears conservative but ineffective in enhancing shareholder value.
The full reasoning comes with a free account.
The current yield is -4.29%, which is far below the target of 8-10%.
The full reasoning comes with a free account.
Free account
Read the full American Water Works analysis free
- The full reasoning behind all four pillars
- The 5-year price target and the return it implies
- What would change the call
- Graham, Lynch and Greenblatt on the same stock
3 full analyses a week · no card needed
For and against
The strongest points on each side, with the numbers behind them.
In its favor
5- 1 of 36.5% sits in the top quintile of the utilities sector.
- 2Net margin of 21.2% also exceeds the sector average of 18.3%.
- 3Serves approximately 3.4 million customers across 14 states, providing a stable revenue base.
- 4Has a strong regulatory framework that supports its .
Concerns
5- 1 of 4.4% is below the sector top-quintile cutoff of 7.7%, indicating weak returns.
- 2High net debt/EBITDA of 5.62 suggests significant risks.
- 3EPS has a 5-year CAGR of -4.8%, indicating declining profitability.
- 4Current ratio of 0.37 raises concerns about short-term liquidity.
Price history
$136-22.8%· 5-year return
Weekly closing prices. Touch or hover the line for a date.
The business
How the business works
American Water Works provides essential water and wastewater services to approximately 3.4 million customers across 14 states. Revenue comes primarily from residential and commercial customers, which is stable but subject to regulatory oversight. The company operates extensive infrastructure, including 52,500 miles of pipes and 480 treatment plants, ensuring a continuous cash flow from its operations. However, the unit economics are challenged by high capital intensity and regulatory constraints.
What other investors would say
The same company, judged by three other documented playbooks.
Keep researching
Similar companies in Utilities
Free weekly email
Liked the read on AWK? Get the next ones on Monday.
Every Monday: the stocks most of the seven investors newly agree on. One email, unsubscribe any time.
Research, not investment advice.
See the Buffett analysis of American Water Works
The score, the checklist and the full reasoning open with a free account. You get 3 full analyses a week, and this stock is the first one. No card needed.
Create a free account3 full analyses a week · no card needed
Already have an account? Sign in