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Essential Utilities (WTRG) Could Be 20% Undervalued After Customer Growth And Investment Plans

Simply Wall St · 3d ago

Customer growth and investment plans move into focus

Essential Utilities (WTRG) is drawing attention after outlining plans to expand its customer base through organic growth and acquisitions, alongside a planned US$1.7b capital investment program in 2026.

Over the past year, Essential Utilities has seen its share price build steady momentum, with a 90 day share price return of 11.11% and a year to date share price return of 6.31%. The 1 year total shareholder return of 9.77% points to relatively supportive sentiment around the recent customer growth and capital plans.

Scan for other regulated utilities showing similar customer growth and capital spending momentum by reviewing the hand picked 39 power grid technology and infrastructure stocks alongside Essential Utilities.

After this steady share price climb and a sizeable capital plan on the table, the real test for Essential Utilities is whether today’s valuation still leaves enough upside to justify the risks that come with it.

Most Popular Narrative: 20% Undervalued

The most followed Essential Utilities narrative sees fair value at $41.20 based on analyst assumptions, compared with the last close at $41.11. It focuses heavily on how customer growth, regulation and long term infrastructure spending feed into cash flows.

Ongoing and anticipated infrastructure investment, $1.4 billion planned for 2025 and a multi-year CAGR of 6 to 8% in regulated rate base, positions Essential Utilities to capitalize on expanding, long-term demand for water and wastewater services due to population growth and urbanization, supporting reliable revenue and cash flow growth.

Read the complete narrative. Read the complete narrative.

Want to see what is behind that fair value gap. Analysts are baking in steady revenue expansion, rising margins and a richer earnings multiple. Curious how those three elements interact to support the valuation case.

Result: Fair Value of $41.20 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, Essential Utilities still faces meaningful risk if Pennsylvania rate decisions or rising infrastructure and PFAS compliance costs are less favorable than analysts currently factor in.

Find out about the key risks to this Essential Utilities narrative.

Next Steps

Given the mix of optimism around Essential Utilities and the clear risks flagged by recent analysis, it makes sense to move quickly and review the details yourself. To weigh both sides of the story and see how those concerns and potential rewards line up, start by reviewing the 2 key rewards and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.