Connecticut Water Service (NASDAQ: CTWS) and Middlesex Water (NASDAQ:MSEX) are both small-cap utilities companies, but which is the better business? We will compare the two companies based on the strength of their valuation, earnings, dividends, analyst recommendations, risk, profitability and institutional ownership.

Dividends

Connecticut Water Service pays an annual dividend of $1.19 per share and has a dividend yield of 1.9%. Middlesex Water pays an annual dividend of $0.85 per share and has a dividend yield of 2.0%. Connecticut Water Service pays out 59.5% of its earnings in the form of a dividend. Middlesex Water pays out 63.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Connecticut Water Service has raised its dividend for 47 consecutive years.

Valuation and Earnings

This table compares Connecticut Water Service and Middlesex Water’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Connecticut Water Service $101.43 million 7.12 $44.36 million $2.00 31.20
Middlesex Water $132.75 million 5.32 $52.96 million $1.33 32.50

Middlesex Water has higher revenue and earnings than Connecticut Water Service. Connecticut Water Service is trading at a lower price-to-earnings ratio than Middlesex Water, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Connecticut Water Service has a beta of 0.11, meaning that its share price is 89% less volatile than the S&P 500. Comparatively, Middlesex Water has a beta of 0.41, meaning that its share price is 59% less volatile than the S&P 500.

Profitability

This table compares Connecticut Water Service and Middlesex Water’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Connecticut Water Service 21.37% 9.21% 2.80%
Middlesex Water 16.46% 9.95% 3.50%

Analyst Recommendations

This is a breakdown of current ratings and target prices for Connecticut Water Service and Middlesex Water, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Connecticut Water Service 0 1 0 0 2.00
Middlesex Water 0 0 1 0 3.00

Connecticut Water Service presently has a consensus price target of $57.00, suggesting a potential downside of 8.65%. Middlesex Water has a consensus price target of $44.00, suggesting a potential upside of 1.80%. Given Middlesex Water’s stronger consensus rating and higher possible upside, analysts plainly believe Middlesex Water is more favorable than Connecticut Water Service.

Institutional and Insider Ownership

46.8% of Connecticut Water Service shares are owned by institutional investors. Comparatively, 49.1% of Middlesex Water shares are owned by institutional investors. 2.5% of Connecticut Water Service shares are owned by insiders. Comparatively, 3.5% of Middlesex Water shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

Middlesex Water beats Connecticut Water Service on 12 of the 17 factors compared between the two stocks.

Connecticut Water Service Company Profile

Connecticut Water Service, Inc. is a non-operating holding company. The Company’s income is derived from the earnings of its subsidiary companies, including The Connecticut Water Company (Connecticut Water), The Maine Water Company (Maine Water), New England Water Utility Services, Inc. (NEWUS),The Avon Water Company (AWC) and Chester Realty Company (Chester Realty). It operates through three segments: Water Operations, Real Estate Transactions, and Services and Rentals. The Water Activities segment consists of its regulated water activities to supply public drinking water to customers. The Real Estate Transactions segment involves the sale or donation for income tax benefits of its real estate holdings. Services and Rentals segment provides contracted services to water and wastewater utilities and other clients, and also leases certain of the Company’s properties to third parties through unregulated companies in the State of Connecticut and through Maine Water in the State of Maine.

Middlesex Water Company Profile

Middlesex Water Company is a water utility company. The Company owns and operates regulated water utility and wastewater systems in New Jersey, Delaware and Pennsylvania. The Company also operates water and wastewater systems under contract on behalf of municipal and private clients in New Jersey and Delaware. The Company’s segments include Regulated and Non-Regulated. The Regulated segment is engaged in the business of collecting, treating and distributing water on a retail and wholesale basis to residential, commercial, industrial and fire protection customers in parts of New Jersey, Delaware and Pennsylvania. The Non-Regulated segment primarily consists of non-regulated contract services for the operation and maintenance of municipal and private water and wastewater systems in New Jersey and Delaware. The Middlesex System treats, stores and distributes water for residential, commercial, industrial and fire protection purposes.

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