At the current price of $37, what is the market’s view of Artesian Resources’ future operating performance? Artesian Resources’ common shares will need to reach $62 to achieve average annual stock market performance of 9.0% over the next 6 years. Artesian Resources’ stock price will need to reach $73 by 2028 to achieve upper quartile performance.
Executive Summary
- Key Artesian Resources characteristics: high stability, high financial strength, low profitability, and very low expected growth. A big positive influence on Artesian Resources’ valuation is its superior Risk Profile.
- Low valuation, lagging shareholder returns. Current valuation levels are below average relative to the Artesian Resources Peer Group. Recent market returns have substantially underperformed the Artesian Resources Peer Group. Total shareholder returns expected to seriously lag the overall equity market. Based on current investor expectations, Artesian Resources shares should reach a level of $43 by 2028 — an 6.1% per year total shareholder return. A 2028 stock price of $62 would reflect median performance and a price of $73 would be required to reach upper quartile performance.
- Artesian Resources’ achieved growth is very high. Historical growth has been very high relative to the Artesian Resources Peer Group and forecasted growth is relatively below average. Asset Growth has been superior. This factor has buoyed market perceptions of Artesian Resources. Artesian Resources’ historical income statement growth has been in line with balance sheet growth. Revenue growth has paralleled asset growth; earnings growth has paralleled equity growth and return on equity has been stable.
- Profitability is slightly above average. The company has below average cash and will have to work to generate attractive investment opportunities and improve valuation.
- Risk Profile has been Artesian Resources’ biggest valuation strength. Artesian Resources’ risk profile is very favorable. Overall variability has been very low with very low revenue variability, very low E.P.S. variability, and very low stock price volatility. Financial Strength is relatively very high and earnings’ expectations are unavailable. The debt/capital ratio has declined very significantly.
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