Valuation Scorecard: Stock Rating F-Lowest (4/9/24)-Middlesex Water Co (MSEX).

As reflected at the current price of $50, what future Middlesex Water operating performance is the market anticipating? To achieve average annual stock market performance of 9.0% over the next 6 years, Middlesex Water shares will need to reach $84. To achieve Upper quartile performance, Middlesex Water’s stock price will need to reach $99 by 2029.

Executive Summary

• Price Target Research identifies Middlesex Water as having: instability, below average financial strength, very low expected growth, and very low profitability. A big negative influence on Middlesex Water’s valuation is its poor Profitability.
• High valuation, lagging shareholder returns. Current valuation levels are high relative to the Middlesex Water Peer Group. Recent market returns have substantially underperformed the Middlesex Water Peer Group. Total shareholder returns expected to seriously lag the overall equity market. Based on current investor expectations, Middlesex Water shares should reach a level of $59 by 2029 — an 5.5% per year total shareholder return. A 2029 stock price of $84 would reflect median performance and a price of $99 would be required to reach upper quartile performance.
• Middlesex Water’s historical growth is slightly below average. Historical growth has been below average relative to the Middlesex Water Peer Group and forecasted growth is relatively very low. Asset Growth has been superior. EPS Growth has lagged. Middlesex Water’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity.
• Profitability has been Middlesex Water’s biggest valuation weakness. Return on Equity, and Asset Turnover are group lagging. These factors have negatively affected market perceptions of Middlesex Water. The company has high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• Middlesex Water’s risk profile is unfavorable. Overall variability has been relatively low with relatively low revenue variability, relatively low E.P.S. variability, and very high stock price volatility. Financial Strength is below average and earnings’ expectations are very low. The debt/capital ratio has risen.

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