The fresh regulatory approval in Maryland and the latest infrastructure work in California have put American Water Works Company (AWK) back in focus for investors watching how utility earnings and capital projects connect.

Those Maryland rate approvals and California infrastructure upgrades come as the share price has recorded a 5.17% 1 month share price return and a 4.21% year to date share price return, while the 5 year total shareholder return of 9.85% points to steadier, longer term compounding.

If this kind of regulated utility story has your attention, it could be a good moment to see what else is available through our list of 23 power grid technology and infrastructure stocks.

With earnings per share at US$5.69, a recent share price around US$135.81 and the stock trading only about 1% below the latest analyst target, is there still a buying opportunity here, or is the market already pricing in future growth?

Most Popular Narrative: 1.9% Undervalued

With American Water Works Company closing at around $135.81 versus a narrative fair value of $138.40, the current setup hinges on how future earnings, margins and capital spending interact with regulation.

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

Curious what keeps that fair value just above today’s price? It hinges on measured revenue growth, slightly higher margins and a future earnings multiple that assumes steady execution.

Using a 6.978% discount rate, the most followed narrative points to a fair value of $138.40, only modestly above the recent share price and implying the current market level is close to those long term assumptions. The gap is small, so the key question for you is whether the expected earnings path, gradual margin improvement and planned capital program feel achievable under real world regulatory and financing conditions.

Result: Fair Value of $138.40 (UNDERVALUED)

However, that story can change quickly if rising operating and financing costs bite into margins, or if key state regulators push back on requested rate relief.

Another View: Cash Flows Paint A Stricter Picture

While earnings based fair value sits close to the current share price, our DCF model points to a different conclusion. On this view, American Water Works Company at $135.81 compares to an estimated future cash flow value of $111.04, which screens as overvalued rather than slightly cheap. Which signal carries more weight for you: earnings or cash flows?

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 49 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

With mixed signals across earnings, cash flows, risks and rewards, does the overall picture feel balanced enough for you to act with confidence, or not yet? If you want to weigh those concerns and potential upsides directly, take a moment to review the 2 key rewards and 2 important warning signs and decide where you stand.

Ready to size up your next idea?

If you feel on the fence after looking at American Water Works Company, do not stop here. Broaden your watchlist with a few focused idea lists built from our screener.

• Target steady compounders by checking companies that screen as quality and potentially mispriced through our 49 high quality undervalued stocks.
• Prioritize resilience by reviewing businesses that pass our balance sheet checks in the solid balance sheet and fundamentals stocks screener (40 results).
• Hunt for fresh stories early by scanning smaller, underfollowed names using our screener containing 24 high quality undiscovered gems.

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.