We recently compiled a list of the 10 Worst Performing Utilities Stocks to Buy According to Analysts. In this article, we are going to take a look at where The York Water Company (NASDAQ:YORW) stands against the other bad performing utilities stocks.
As 2025 kicks off, the global energy sector continues to face a volatile and fast-moving landscape, says James Forrest (Group Industry Leader for Energy Transition and Utilities at Capgemini). The pressures due to higher electricity demands, shifts in geopolitical conditions, and digital advancements converge to reassess the way energy is produced, managed, and consumed. The global increase in electricity demand continues, courtesy of the electrification of transport, industrial transformation, and the strong growth of digital infrastructure, such as AI and data centers. To address this, utilities and grid operators have been embracing modernization and demand-response tactics.
Utility CapEx to Increase, Says Fitch Ratings
Fitch Ratings’ neutral outlook demonstrates moderation in inflationary conditions and a subdued commodity environment. Furthermore, a resurgence of growth in sales, mainly among commercial and industrial customers, cost control, and the tax subsidies and transferability provision of the Inflation Reduction Act can be beneficial for the broader sector. The rating agency believes that utility capex is expected to grow at a double-digit rate, fueled by the investments to make the electric infrastructure more resilient to withstand extreme weather events, accommodate renewable generation, and cater to the needs of the expected surge in power demand from data centers.
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Power Demand Needs Utility Investment, Opines Goldman Sachs
With data centers contributing to an increasing need for power, the electric grid will need a significant investment. Goldman Sachs Research projects that ~$720 billion of grid spending through 2030 might be the requirement. Such transmission projects might take several years to permit, and then even more to build, resulting in another bottleneck for data center growth in case the regions are not proactive about this considering the lead time, says James Schneider, a senior equity research analyst at Goldman Sachs. The firm expects global power demand from data centers to increase by 50% by 2027 and by 165% by the decade’s end (as compared to 2023).
Economic Times mentioned that the US electric utilities continue to add billions of dollars to spending plans so that they can build new power supplies and bolster the grid as data centers for AI and cloud computing have been fueling energy demand.
Our Methodology
To list the 10 Worst Performing Utilities Stocks to Buy According to Analysts, we used a screener and shortlisted the companies catering to the utilities sector that have performed the worst over the past year, as of February 19. Next, we chose the ones that analysts see significant upside to. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 19. We also mentioned hedge fund sentiments around each stock, as of Q4 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A reservoir at sunrise, reflecting the regulated water company’s commitment to providing reliable water services.
The York Water Company (NASDAQ:YORW)
% Decline Over Past Year: ~8.4%
Average Upside Potential: ~25.2%
Number of Hedge Fund Holders: 8
The York Water Company (NASDAQ:YORW) impounds, purifies, and distributes drinking water. The company has completed the Lake Williams Dam Rehabilitation project on time and within budget. This project formed part of The York Water Company (NASDAQ:YORW)’s broader strategy to invest in infrastructure and ensure the provisioning of safe and reliable water services. In Q3 2024, the company saw operating revenues of $19,715,000, reflecting an increase of $948,000, mainly aided by the revenues from the Distribution System Improvement charge (DSIC) and growth in the customer base.
To provide some context, The DSIC is a Pennsylvania Public Utility Commission-allowed charge that water utilities collect from customers, and is associated with the replacement of aging infrastructure. During the first nine months of 2024, The York Water Company (NASDAQ:YORW) invested $33 million in capital projects for armoring and to replace the spillway of the Lake Williams dam, wastewater treatment plant construction, and various replacements and improvements to infrastructure and routine items. Therefore, The York Water Company (NASDAQ:YORW)’s strong emphasis on sustainable practices, infrastructure upgrades, and strategic expansions can help maintain its resiliency moving forward.
With more housing developments and commercial properties, there will be increased demand for clean water and wastewater services, fueling The York Water Company (NASDAQ:YORW)’s revenue. This growth is expected to be aided by its capital plan and strategic acquisitions.
Overall YORW ranks 9th on our list of the worst performing utilities stocks to buy according to analysts. While we acknowledge the potential of YORW as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than YORW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.