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Aqua America Since 1888

Aqua America Since 1888. Jordan Nicholas and Matt Conley. Background Information. Symbol: WTR Exchange: NYSE Industry: Water Utilities Sector: Utilities High: $29.79 Low: $20.13 Current: $22.89 Beta: .16 Market Cap: $3.01 B Dividend Yield: 2.04% P/E Ratio: 33.39%. Financial Ratios.

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Aqua America Since 1888

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  1. Aqua AmericaSince 1888 Jordan Nicholas and Matt Conley

  2. Background Information • Symbol: WTR • Exchange: NYSE • Industry: Water Utilities • Sector: Utilities • High: $29.79 Low: $20.13 Current: $22.89 • Beta: .16 • Market Cap: $3.01 B • Dividend Yield: 2.04% • P/E Ratio: 33.39%

  3. Financial Ratios

  4. Conference Call • Increased Revenue, EPS, and Net Income for 4Q compared to 4Q2005 • Previous 3 quarters affected by weather, regulatory lag, and inflationary impact on production costs • Year- end revenue and net income up from 2005 • Diluted EPS down slightly • Rate Relief • Customer Growth up 7%

  5. Conference Call Cont.Analyst Questions • Most analysts are basing the firm’s EPS growth, 12-15%, on positive outlook for the weather -CEO: Conservative outlook of 10% in 2007 • Inflationary and Interest Rate Impact • Will there be equity issuance? -No,should be able to use retained earnings to finance future capital expenditures (No need to take out substantial debt or equity)

  6. Model By Comparables2005 Numbers

  7. Model By Comparables2006 Numbers

  8. Analyst Recommendations Yahoo Finance: Reuters:

  9. Risks • Requires significant capital expenditures • Operating costs could increase due to new or stricter regulatory standards • Subject to seasonal fluctuations • Drought conditions • Future acquisitions could involve risk • Contamination of water supply

  10. Investment Thesis Moderate Buy • Pro’s: • Socially responsible and sustainable company. • Promising future outlook for the need that Aqua America fulfills. • Good Corporate Governance Ratings • Low Beta: WTR - .16 , Industry - .42 • Promising Institutional Ownership • Clean 10-k (no red flags) • Con’s: • Significant risks with no clear explanation of how they are managed • Very High PE, very low quick and current ratios, low interest coverage, and a down EPS by .1 from 2005 • Strict Industry Regulations • Negative Insider Trading • Poor Eval and Comparables Model implied stock price

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