GWRS stock is a buy, Roth says

Its third quarter results are in the books and Roth MKM analyst Gerry Sweeney still thinks there is money to be made on Global Water Resources (Global Water Resources Stock Quote, Chart, News, Analysts, Financials Nasdaq:GWRS)

On November 8, GWRS reported its Q3, 2023 results. The company posted Adjusted EBITDA of $7.6-million on revenue of $14.5-million, a topline that was up 22.2 per cent over the same period a year prior.

“In Q3, we achieved strong double-digit top-line and bottom-line growth,” stated Global Water Resources president and CEO, Ron Fleming. “Revenues from water, wastewater and recycled water services increased, driven by organic growth in connections, increased rates and higher consumption. The growth also included contribution from our Farmers Water acquisition, which we completed in February as our largest acquisition since going public on Nasdaq in 2016.”

Sweeney summarized the quarter.

“GWRS beat our estimates driven predominantly by higher volumes of water sold driven by temperature and low precipitation,” he said. “Organic growth has slowed from halcyon days of 2021, however, at 3.2% it remains well above industry averages (~1.0%) and housing permits have rebounded 50% y/y. Further,
multifamily and industrial expansion continue to expand rapidly. GWRS brought its Southwest plant into service adding $42mm to rate base and acquisitions remain a key potential driver of expansion. GWRS’s valuation compared to direct peers remains highly favorable.”

In a research update to clients November 9, Sweeney maintained his “Buy” rating and one-year price target of $18.00 on GWRS stock.

The analyst thinks GWRS will post EBITDA of $24.6-million on revenue of $52.7-million in fiscal 2023. In fiscal 2024 he expects EBITDA of $24.5-million on a topline of $51.5-million.

“GWRS trades at 15.0x 2024E EBITDA as compared to direct comparable companies York Water (YORW-NC) and Middlesex (MSEX-NC), which trade 17.4x and 19.4x EBITDA,” the analyst concluded. “We believe GWRS continues to look attractive given its higher than industry growth rate, acquisition opportunities and overall valuation. We estimate organic growth for the industry on average is ~ 1.0%, while GWRS most organic growth level is 3.2%. We believe this will improve towards 4.0% in 2024 as single-family housing permits have rebounded significantly in 2023 over 2022.”