Intrinsic value of American Water Works - AWK

Previous Close

$81.59

  Intrinsic Value

$30.91

stock screener

  Rating & Target

str. sell

-62%

  Value-price divergence*

-25%

Previous close

$81.59

 
Intrinsic value

$30.91

 
Up/down potential

-62%

 
Rating

str. sell

 
Value-price divergence*

-25%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of AWK stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 14.8

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.53
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,302
  3,368
  3,446
  3,534
  3,633
  3,744
  3,864
  3,996
  4,139
  4,292
  4,457
  4,633
  4,821
  5,021
  5,234
  5,460
  5,699
  5,952
  6,220
  6,503
  6,802
  7,117
  7,450
  7,800
  8,169
  8,558
  8,968
  9,399
  9,852
  10,330
  10,831
Variable operating expenses, $m
 
  2,220
  2,268
  2,323
  2,385
  2,453
  2,528
  2,609
  2,697
  2,792
  2,894
  2,869
  2,985
  3,109
  3,241
  3,381
  3,529
  3,686
  3,852
  4,027
  4,212
  4,407
  4,613
  4,830
  5,059
  5,300
  5,554
  5,820
  6,101
  6,397
  6,708
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,222
  2,220
  2,268
  2,323
  2,385
  2,453
  2,528
  2,609
  2,697
  2,792
  2,894
  2,869
  2,985
  3,109
  3,241
  3,381
  3,529
  3,686
  3,852
  4,027
  4,212
  4,407
  4,613
  4,830
  5,059
  5,300
  5,554
  5,820
  6,101
  6,397
  6,708
Operating income, $m
  1,080
  1,148
  1,177
  1,211
  1,249
  1,291
  1,337
  1,387
  1,441
  1,500
  1,562
  1,764
  1,836
  1,912
  1,993
  2,079
  2,170
  2,266
  2,368
  2,476
  2,590
  2,710
  2,836
  2,970
  3,110
  3,258
  3,414
  3,578
  3,751
  3,933
  4,124
EBITDA, $m
  1,550
  1,696
  1,735
  1,780
  1,830
  1,885
  1,946
  2,013
  2,084
  2,162
  2,245
  2,333
  2,428
  2,529
  2,636
  2,750
  2,870
  2,998
  3,133
  3,275
  3,426
  3,585
  3,752
  3,929
  4,115
  4,310
  4,517
  4,734
  4,962
  5,202
  5,455
Interest expense (income), $m
  327
  341
  356
  371
  388
  407
  428
  451
  476
  504
  533
  565
  599
  635
  673
  714
  758
  804
  853
  904
  958
  1,016
  1,076
  1,140
  1,208
  1,279
  1,354
  1,432
  1,515
  1,602
  1,694
Earnings before tax, $m
  770
  807
  822
  841
  861
  884
  909
  936
  965
  996
  1,029
  1,199
  1,237
  1,277
  1,319
  1,364
  1,412
  1,462
  1,516
  1,572
  1,631
  1,694
  1,760
  1,829
  1,903
  1,980
  2,061
  2,146
  2,236
  2,330
  2,430
Tax expense, $m
  302
  218
  222
  227
  233
  239
  245
  253
  260
  269
  278
  324
  334
  345
  356
  368
  381
  395
  409
  424
  440
  457
  475
  494
  514
  535
  556
  579
  604
  629
  656
Net income, $m
  468
  589
  600
  614
  629
  645
  664
  683
  704
  727
  751
  875
  903
  932
  963
  996
  1,031
  1,068
  1,106
  1,148
  1,191
  1,237
  1,285
  1,335
  1,389
  1,445
  1,504
  1,567
  1,632
  1,701
  1,774

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  75
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  18,482
  18,816
  19,249
  19,743
  20,299
  20,914
  21,589
  22,325
  23,120
  23,978
  24,898
  25,883
  26,933
  28,052
  29,240
  30,502
  31,838
  33,253
  34,749
  36,330
  38,000
  39,761
  41,619
  43,577
  45,640
  47,812
  50,100
  52,508
  55,042
  57,707
  60,511
Adjusted assets (=assets-cash), $m
  18,407
  18,816
  19,249
  19,743
  20,299
  20,914
  21,589
  22,325
  23,120
  23,978
  24,898
  25,883
  26,933
  28,052
  29,240
  30,502
  31,838
  33,253
  34,749
  36,330
  38,000
  39,761
  41,619
  43,577
  45,640
  47,812
  50,100
  52,508
  55,042
  57,707
  60,511
Revenue / Adjusted assets
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
  0.179
Average production assets, $m
  8,362
  8,528
  8,724
  8,948
  9,200
  9,479
  9,785
  10,118
  10,479
  10,867
  11,285
  11,731
  12,207
  12,714
  13,252
  13,824
  14,430
  15,071
  15,749
  16,466
  17,223
  18,021
  18,863
  19,750
  20,685
  21,670
  22,707
  23,798
  24,946
  26,155
  27,425
Working capital, $m
  -1,608
  -266
  -272
  -279
  -287
  -296
  -305
  -316
  -327
  -339
  -352
  -366
  -381
  -397
  -413
  -431
  -450
  -470
  -491
  -514
  -537
  -562
  -589
  -616
  -645
  -676
  -708
  -743
  -778
  -816
  -856
Total debt, $m
  7,182
  7,409
  7,719
  8,074
  8,472
  8,913
  9,398
  9,925
  10,495
  11,110
  11,770
  12,476
  13,229
  14,031
  14,883
  15,788
  16,746
  17,760
  18,833
  19,967
  21,164
  22,427
  23,759
  25,162
  26,642
  28,199
  29,840
  31,566
  33,383
  35,294
  37,304
Total liabilities, $m
  13,264
  13,491
  13,801
  14,156
  14,554
  14,995
  15,480
  16,007
  16,577
  17,192
  17,852
  18,558
  19,311
  20,113
  20,965
  21,870
  22,828
  23,842
  24,915
  26,049
  27,246
  28,509
  29,841
  31,244
  32,724
  34,281
  35,922
  37,648
  39,465
  41,376
  43,386
Total equity, $m
  5,218
  5,325
  5,447
  5,587
  5,745
  5,919
  6,110
  6,318
  6,543
  6,786
  7,046
  7,325
  7,622
  7,939
  8,275
  8,632
  9,010
  9,411
  9,834
  10,281
  10,754
  11,252
  11,778
  12,332
  12,916
  13,531
  14,178
  14,860
  15,577
  16,331
  17,125
Total liabilities and equity, $m
  18,482
  18,816
  19,248
  19,743
  20,299
  20,914
  21,590
  22,325
  23,120
  23,978
  24,898
  25,883
  26,933
  28,052
  29,240
  30,502
  31,838
  33,253
  34,749
  36,330
  38,000
  39,761
  41,619
  43,576
  45,640
  47,812
  50,100
  52,508
  55,042
  57,707
  60,511
Debt-to-equity ratio
  1.376
  1.390
  1.420
  1.450
  1.470
  1.510
  1.540
  1.570
  1.600
  1.640
  1.670
  1.700
  1.740
  1.770
  1.800
  1.830
  1.860
  1.890
  1.920
  1.940
  1.970
  1.990
  2.020
  2.040
  2.060
  2.080
  2.100
  2.120
  2.140
  2.160
  2.180
Adjusted equity ratio
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283
  0.283

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  468
  589
  600
  614
  629
  645
  664
  683
  704
  727
  751
  875
  903
  932
  963
  996
  1,031
  1,068
  1,106
  1,148
  1,191
  1,237
  1,285
  1,335
  1,389
  1,445
  1,504
  1,567
  1,632
  1,701
  1,774
Depreciation, amort., depletion, $m
  470
  548
  558
  569
  581
  595
  609
  626
  643
  662
  682
  569
  593
  617
  643
  671
  700
  732
  765
  799
  836
  875
  916
  959
  1,004
  1,052
  1,102
  1,155
  1,211
  1,270
  1,331
Funds from operations, $m
  1,232
  1,137
  1,158
  1,182
  1,210
  1,240
  1,273
  1,309
  1,347
  1,389
  1,433
  1,445
  1,495
  1,549
  1,606
  1,667
  1,731
  1,799
  1,871
  1,947
  2,027
  2,111
  2,200
  2,294
  2,393
  2,497
  2,607
  2,722
  2,843
  2,971
  3,105
Change in working capital, $m
  -44
  -5
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -19
  -20
  -21
  -22
  -24
  -25
  -26
  -28
  -29
  -31
  -32
  -34
  -36
  -38
  -40
Cash from operations, $m
  1,276
  1,143
  1,164
  1,189
  1,218
  1,249
  1,283
  1,319
  1,359
  1,401
  1,447
  1,459
  1,510
  1,565
  1,623
  1,685
  1,750
  1,819
  1,892
  1,969
  2,051
  2,136
  2,227
  2,322
  2,422
  2,528
  2,639
  2,756
  2,879
  3,009
  3,145
Maintenance CAPEX, $m
  0
  -406
  -414
  -423
  -434
  -447
  -460
  -475
  -491
  -509
  -528
  -548
  -569
  -593
  -617
  -643
  -671
  -700
  -732
  -765
  -799
  -836
  -875
  -916
  -959
  -1,004
  -1,052
  -1,102
  -1,155
  -1,211
  -1,270
New CAPEX, $m
  -1,311
  -166
  -196
  -224
  -252
  -279
  -306
  -333
  -361
  -389
  -417
  -446
  -476
  -507
  -539
  -572
  -606
  -641
  -678
  -717
  -757
  -798
  -842
  -887
  -935
  -985
  -1,037
  -1,091
  -1,148
  -1,208
  -1,271
Cash from investing activities, $m
  -1,587
  -572
  -610
  -647
  -686
  -726
  -766
  -808
  -852
  -898
  -945
  -994
  -1,045
  -1,100
  -1,156
  -1,215
  -1,277
  -1,341
  -1,410
  -1,482
  -1,556
  -1,634
  -1,717
  -1,803
  -1,894
  -1,989
  -2,089
  -2,193
  -2,303
  -2,419
  -2,541
Free cash flow, $m
  -311
  570
  554
  542
  532
  523
  516
  511
  507
  504
  502
  465
  465
  466
  467
  470
  473
  477
  482
  488
  495
  502
  510
  519
  528
  539
  550
  562
  575
  589
  604
Issuance/(repayment) of debt, $m
  630
  302
  310
  355
  398
  441
  484
  527
  571
  615
  660
  706
  753
  802
  852
  904
  958
  1,014
  1,073
  1,134
  1,197
  1,263
  1,332
  1,404
  1,479
  1,558
  1,640
  1,726
  1,817
  1,911
  2,010
Issuance/(repurchase) of shares, $m
  -65
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  602
  302
  310
  355
  398
  441
  484
  527
  571
  615
  660
  706
  753
  802
  852
  904
  958
  1,014
  1,073
  1,134
  1,197
  1,263
  1,332
  1,404
  1,479
  1,558
  1,640
  1,726
  1,817
  1,911
  2,010
Total cash flow (excl. dividends), $m
  291
  872
  864
  896
  930
  965
  1,001
  1,038
  1,078
  1,119
  1,162
  1,171
  1,218
  1,267
  1,320
  1,374
  1,432
  1,492
  1,555
  1,622
  1,692
  1,765
  1,842
  1,923
  2,008
  2,097
  2,190
  2,289
  2,392
  2,501
  2,615
Retained Cash Flow (-), $m
  -169
  -107
  -122
  -140
  -157
  -174
  -191
  -208
  -225
  -243
  -260
  -279
  -297
  -317
  -336
  -357
  -378
  -400
  -423
  -447
  -472
  -498
  -526
  -554
  -584
  -615
  -647
  -681
  -717
  -754
  -793
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  765
  742
  756
  773
  790
  809
  830
  852
  876
  901
  892
  921
  951
  983
  1,017
  1,053
  1,092
  1,132
  1,174
  1,219
  1,266
  1,316
  1,369
  1,424
  1,482
  1,543
  1,607
  1,675
  1,746
  1,821
Discount rate, %
 
  8.70
  9.14
  9.59
  10.07
  10.57
  11.10
  11.66
  12.24
  12.85
  13.50
  14.17
  14.88
  15.62
  16.41
  17.23
  18.09
  18.99
  19.94
  20.94
  21.98
  23.08
  24.24
  25.45
  26.72
  28.06
  29.46
  30.93
  32.48
  34.11
  35.81
PV of cash for distribution, $m
 
  704
  623
  575
  526
  478
  430
  384
  338
  295
  254
  208
  174
  144
  117
  94
  74
  57
  43
  32
  23
  16
  11
  7
  5
  3
  2
  1
  1
  0
  0
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

American Water Works Company, Inc., through its subsidiaries, provides water and wastewater services in the United States and Canada. The company offers water and wastewater services to approximately 1,600 communities in 16 states. It operates approximately 81 surface water treatment plants with approximately 522 groundwater treatment plants and 1,022 groundwater wells; 121 wastewater treatment facilities, 1,284 treated water storage facilities, 1,433 pumping stations, 80 dams, and 49,635 miles of mains and collection pipes. The company also undertakes contracts to design, build, operate, and maintain water and wastewater facilities for military bases, municipalities, the food and beverage industry, and other customers. In addition, it provides warranty-type services to homeowners and smaller commercial customers to protect against the cost of repairing broken or leaking water pipes or clogged or blocked sewer pipes, as well as interior electric line repairs; and water sourcing, transfer services, pipeline construction, water and equipment hauling, and water storage solutions for natural gas exploration and production companies. The company serves residential customers; commercial customers, such as offices, retail stores, and restaurants; industrial customers, including manufacturing and production operations; public authorities, which comprise government buildings and other public sector facilities; and other water utilities, as well as supplies water to public fire hydrants for firefighting purposes, and private fire customers for use in fire suppression systems in office buildings and other facilities, as well as to other water utilities. American Water Works Company, Inc. serves approximately 15 million people with drinking water, wastewater, and other water-related services in 47 states, the District of Columbia, and Ontario, Canada. The company was founded in 1886 and is headquartered in Voorhees, New Jersey.

FINANCIAL RATIOS  of  American Water Works (AWK)

Valuation Ratios
P/E Ratio 31
Price to Sales 4.4
Price to Book 2.8
Price to Tangible Book
Price to Cash Flow 11.4
Price to Free Cash Flow -415.2
Growth Rates
Sales Growth Rate 4.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 13%
Cap. Spend. - 3 Yr. Gr. Rate 6%
Financial Strength
Quick Ratio 0
Current Ratio 0.2
LT Debt to Equity 110.4%
Total Debt to Equity 137.6%
Interest Coverage 3
Management Effectiveness
Return On Assets 3.7%
Ret/ On Assets - 3 Yr. Avg. 3.9%
Return On Total Capital 3.9%
Ret/ On T. Cap. - 3 Yr. Avg. 4%
Return On Equity 9.1%
Return On Equity - 3 Yr. Avg. 9.1%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 47.5%
EBITDA Margin - 3 Yr. Avg. 47.9%
Operating Margin 32.7%
Oper. Margin - 3 Yr. Avg. 33.3%
Pre-Tax Margin 23.3%
Pre-Tax Margin - 3 Yr. Avg. 23.9%
Net Profit Margin 14.2%
Net Profit Margin - 3 Yr. Avg. 14.4%
Effective Tax Rate 39.2%
Eff/ Tax Rate - 3 Yr. Avg. 39.3%
Payout Ratio 55.8%

AWK stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the AWK stock intrinsic value calculation we used $3302 million for the last fiscal year's total revenue generated by American Water Works. The default revenue input number comes from 2016 income statement of American Water Works. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our AWK stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 8.7%, whose default value for AWK is calculated based on our internal credit rating of American Water Works, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of American Water Works.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of AWK stock the variable cost ratio is equal to 66%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for AWK stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.8% for American Water Works.

Corporate tax rate of 27% is the nominal tax rate for American Water Works. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the AWK stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for AWK are equal to 253.2%.

Life of production assets of 20.6 years is the average useful life of capital assets used in American Water Works operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for AWK is equal to -7.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $5218 million for American Water Works - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 181.818 million for American Water Works is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of American Water Works at the current share price and the inputted number of shares is $14.8 billion.

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COMPANY NEWS

▶ How American Water Works Makes Most of Its Money   [Aug-12-17 10:32AM  Motley Fool]
▶ 3 Stocks to Hold for the Next 50 Years   [Aug-03-17 07:17PM  Motley Fool]
▶ American Water Works misses 2Q profit forecasts   [Aug-02-17 10:54PM  Associated Press]
▶ American Water Declares Quarterly Dividend   [Jul-28-17 12:48PM  Business Wire]
▶ Missouri American Water Files Rate Request   [Jun-30-17 04:36PM  Business Wire]
▶ Better Buy: Aqua America, Inc. vs. American Water Works   [Jun-28-17 11:15AM  Motley Fool]
▶ Hate Risk? You'll Love This Market-Crushing Stock   [Jun-06-17 09:07AM  Motley Fool]
▶ Missouri American Water Name Being Used in Check Scam   [Jun-02-17 03:36PM  Business Wire]
▶ Illinois American Water Releases Water Quality Reports   [Jun-01-17 02:48PM  Business Wire]
▶ Is It Time to Invest in Water?   [May-25-17 06:10PM  GuruFocus.com]
▶ 3 Dividend Stocks for Retirement   [11:48AM  Motley Fool]
▶ American Water Works meets 1Q profit forecasts   [May-03-17 05:58PM  Associated Press]
Stock chart of AWK Financial statements of AWK
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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