DCF Studio

    AWK · NYQ · Utilities

    American Water Works Company, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 13.19

    Market price

    USD 147.43

    Implied upside

    -91.1%

    10-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · Price 2026-11-02 · Accounts to 2025-12-31

    Wrong toolThis model values the shares at 8.9% of the market price. A gap that size is a modelling failure rather than a view - most often an unusable beta, a currency or units mismatch, or a cashflow base that does not represent the business. Read the figures below as diagnostics, not as a call.
    AdjustedFree cashflow is negative in at least one forecast year, so terminal value carries most of the valuation.
    AdjustedCapital expenditure runs at 64.2% of revenue against depreciation of 17.0%. A perpetuity has to be a steady state, so the forecast tapers capex to maintenance at depreciation plus the reinvestment terminal growth requires (g/ROIC of NOPAT), and the terminal year carries on from there. The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 13.19-91.1%
    Exit multiple
    USD 110.24-25.2%
    Market price
    USD 147.43

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    -1bn0bn1bnFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30FY31FY32FY33FY34FY35CAGR
    RevenueUSD 5.4bnUSD 5.8bnUSD 6.2bnUSD 6.5bnUSD 6.9bnUSD 7.2bnUSD 7.5bnUSD 7.8bnUSD 8.0bnUSD 8.2bn+4.7%
    EBITUSD 1.9bnUSD 2.1bnUSD 2.2bnUSD 2.3bnUSD 2.5bnUSD 2.6bnUSD 2.7bnUSD 2.8bnUSD 2.9bnUSD 2.9bn+4.7%
    NOPATUSD 1.5bnUSD 1.6bnUSD 1.7bnUSD 1.8bnUSD 1.9bnUSD 2.0bnUSD 2.1bnUSD 2.2bnUSD 2.3bnUSD 2.3bn+4.7%
    Add depreciation & amortisationUSD 923.9mUSD 987.9mUSD 1.1bnUSD 1.1bnUSD 1.2bnUSD 1.2bnUSD 1.3bnUSD 1.3bnUSD 1.4bnUSD 1.4bn+4.7%
    Less capital expenditureUSD -3.5bnUSD -3.5bnUSD -3.5bnUSD -3.4bnUSD -3.3bnUSD -3.2bnUSD -3.0bnUSD -2.8bnUSD -2.5bnUSD -2.3bn-4.7%
    Capex, % of revenue64.2%60.1%56.1%52.0%47.9%43.8%39.7%35.7%31.6%27.5%-
    Less increase in working capitalUSD -11.0mUSD -13.9mUSD -13.7mUSD -13.3mUSD -12.8mUSD -12.0mUSD -11.1mUSD -10.0mUSD -8.8mUSD -7.4m-4.3%
    Free cashflow to firmUSD -1.1bnUSD -887.9mUSD -691.1mUSD -463.2mUSD -205.3mUSD 80.7mUSD 392.0mUSD 725.2mUSD 1.1bnUSD 1.4bn-
    Discount factor0.96820.90750.85060.79730.74730.70050.65660.61540.57690.5407-
    Present valueUSD -1.0bnUSD -805.8mUSD -587.9mUSD -369.3mUSD -153.4mUSD 56.5mUSD 257.4mUSD 446.3mUSD 620.8mUSD 778.7m-
    Present Value Of The ForecastUSD -773.2m

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.89%US 10-year Treasury (^TNX), 2026-11-02
    Equity risk premium4.23%Damodaran, January 2026
    Beta0.695Reported 0.545, pulled toward 1.0 (Blume)
    Cost of equity7.83%Risk-free + beta x equity risk premium
    Cost of debt5.78%Risk-free + 89bp, the spread for a A- rating at 3.1x interest cover. Book interest / average debt was lower, at 4.1%.
    Market capitalisationUSD 29.4bn64.8% of capital
    Total debtUSD 15.9bn35.2% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC6.69%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 13.19

    104% of EV

    Forecast FCFF, final year
    USD 1.4bn
    Capex at depreciation, working capital in reinvestment
    USD 2.3bn
    Less reinvestment at g/ROIC (37.4% of NOPAT)
    USD -864.5m
    Capitalised
    USD 1.4bn
    ROIC (WACC floor)
    6.7%
    Terminal value, undiscounted
    USD 35.4bn
    Terminal value, discounted
    USD 19.2bn
    Enterprise value
    USD 18.4bn
    Less net debt
    USD 15.8bn
    Equity value
    USD 2.6bn

    Exit at 16.3x EBITDA

    Value per shareUSD 110.24

    102% of EV

    Terminal value, undiscounted
    USD 70.4bn
    Terminal value, discounted
    USD 38.1bn
    Enterprise value
    USD 37.3bn
    Less net debt
    USD 15.8bn
    Equity value
    USD 21.5bn

    Spread between methods: 157%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    4.69%97.53101.27108.06120.61146.19
    5.69%44.7942.1539.5036.8534.20
    6.69%17.4415.3113.1911.068.94
    7.69%-2.35-4.09-5.84-7.59-9.34
    8.69%-17.21-18.67-20.13-21.60-23.06

    Outlined: this model. Green text: above today's price of 147.43. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputActualModelImplied
    Revenue growth, a year10.7%4.8%13.9%
    EBIT margin36.7%35.6%65.9%
    Discount rate-6.7%4.4%
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.