Is American Water Works Company Inc (AWK) Destined for Greatness?

American Water is taking a proactive tack to combat this problem, offering water line and sewer line protection programs to more than 500,000 homeowners in Houston through an educational program sponsored by the city. These programs provide homeowners with comprehensive protection from the costs associated with leaks and breaks in water lines, as well as clogs or blockages in sewer lines running through their property. Since Houston is the eighth most frequent sufferer of leakages per household, such a move should help reduce long-term costs by encouraging customers to report problems early and often.

Increasing operational efficiency by reducing water waste is a major priority at American Water Works Company Inc (NYSE:AWK). American Water, in partnership with electronic pipeline controller manufacturer Steam Control, has bagged a $1.8 million, two-year contract from the Israel-U.S. Binational Industrial Research and Development Foundation for the development of an advanced pressure-management system. This project demonstrates the feasibility of installing modifications on existing pressure system controls that could reduce the pressure in a system in response to low customer demand. This innovation should the frequency of pipe failures and the volume of leaks through pipes by ensuring that pressure is only provided at necessary levels.

This particular industry also stands to cash in on the American energy boom as a result of the necessity for water during the fracking process, and investors should capitalize on this fundamental trend by positioning themselves in water service companies. American Water generated $2.87 billion revenue in 2012, and projections expect revenue to rise to $3.48 billion by 2017. If profitability holds up, and free cash flow doesn’t collapse, this utility could keep gains flowing to shareholders for many years to come.

Putting the pieces together
Today, American Water Works Company Inc (NYSE:AWK) has many of the qualities that make up a great stock, but no stock is truly perfect. Digging deeper can help you uncover the answers you need to make a great buy — or to stay away from a stock that’s going nowhere.

The article Is American Water Works Destined for Greatness? originally appeared on Fool.com and is written by Alex Planes.

Fool contributor Alex Planes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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