Consolidated Water Co. Ltd. CWCO continues to benefit from the use of the most advanced technology to convert seawater to potable water to meet customer needs. Expansion of operations via acquisitions and organic projects is also boosting its performance.
However, this Zacks Rank #3 (Hold) company faces risks related to delay in the collection of accounts receivables and weather fluctuations.
CWCO’s Tailwinds
Nearly 97% of the earth’s water is in the ocean. To harness this resource, Consolidated Water utilizes Reverse Osmosis Technology, one of the most advanced technologies, to convert seawater to potable water at all water treatment plants it constructs and operates. This should help the company to further boost its performance.
Consolidated Water aims to expand its operations in complementary service industries. This should complement its existing business operations. The company is likely to pursue these opportunities, either on its own or through joint ventures, strategic alliances and acquisitions.
The company primarily targets businesses that operate advanced water-treatment plants for the government or government agencies, under medium or long-term contracts.
Consolidated Water operates 10 water production plants with a combined capacity of 24.9 million gallons per day in four countries. It is looking for opportunities in new markets to further expand drinking water and wastewater services. The company is also working relentlessly to boost existing operations in the Cayman Islands and the Bahamas.
Headwinds for CWCO
Consolidated Water’s Bahamas subsidiary experiences substantial delays in the collection of its accounts receivable. CW-Bahamas’ accounts receivable balances (which include accrued interest) due from the Water and Sewerage Corporation of The Bahamas amounted to $25.4 million as of June 30, 2024, and nearly 79% of this amount was delinquent as of the same date. This has adversely impacted the liquidity of this subsidiary.
The demand for water services fluctuates with weather conditions and the level of tourism. The greater-than-expected rainfall during the first half in the service area can adversely impact the company’s operational results and cash flows.
CWCO’s Stock Price Performance
In the past three months, the stock has returned 1.9% compared with the industry’s growth of 12.9%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the same industry are American Water Works AWK, American States Water AWR and SJW Group SJW, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AWK’s long-term (three to five years) earnings growth rate is 8%. The Zacks Consensus Estimate for 2024 EPS indicates a year-over-year increase of 7.6%.
AWR’s long-term earnings growth rate is 6.3%. It delivered an average earnings surprise of 3.4% in the past four quarters.
SJW’s long-term earnings growth rate is 7.5%. The Zacks Consensus Estimate for 2024 EPS indicates a year-over-year increase of 3%.
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