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1. Company Snapshot

1.a. Company Description

California Water Service Group, through its subsidiaries, provides water utility and other related services in California, Washington, New Mexico, Hawaii, and Texas.The company is involved in the production, purchase, storage, treatment, testing, distribution, and sale of water for domestic, industrial, public, and irrigation uses, as well as for fire protection.It offers its services to approximately 494,500 customer connections in 100 California communities; approximately 6,200 water and wastewater customer connections on the islands of Maui and Hawaii; approximately 36,400 customer connections in the Tacoma, Olympia, Graham, Spanaway, Puyallup, and Gig Harbor areas; and approximately 8,600 water and wastewater customer connections in the Belen, Los Lunas, Indian Hills, and Elephant Butte areas in New Mexico.


The company also engages in the provision of non-regulated water-related services, including operating of municipally owned water systems, privately owned water, and recycled water distribution systems; water system operation, meter reading, and billing services to private companies and municipalities; leasing of communication antenna sites on its properties to telecommunication companies; and billing of optional third-party insurance programs to its residential customers, as well as provides lab services.In addition, it offers wastewater collection and treatment services.The company was founded in 1926 and is headquartered in San Jose, California.

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1.b. Last Insights on CWT

Recent earnings surprises and strong revenue growth drove California Water Service Group's performance. The company's Q4 earnings beat estimates, with revenues increasing 3.6% year-over-year. Additionally, a one-time special dividend of $0.04 per common share was declared, providing a boost to shareholders. The company's capital investments, totaling $471 million in 2024 and planned $660 million in 2025, are expected to improve its operations and resiliency. These factors contribute to a positive outlook for the company, driven by its commitment to investing in its infrastructure and rewarding shareholders through dividends.

1.c. Company Highlights

2. California Water Service Group's Q3 2025 Earnings: A Strong Performance Amidst Regulatory Updates

California Water Service Group reported a revenue increase of $11.6 million or 3.9% to $311.2 million in Q3 2025, driven primarily by tariff rate increases and income tax rate changes, which added $0.30 per diluted share. Net income for the quarter was $61.2 million or $1.03 per diluted share, consistent with the prior year. The actual EPS came in below estimates of $1.2. The company's financial performance was solid, despite operating in the third and most challenging year of its rate case cycle in California.

Publication Date: Nov -11

📋 Highlights
  • Q3 Revenue Growth:: Revenue rose $11.6M (3.9%) to $311.2M, driven by tariff hikes and tax rate changes.
  • Capital Investments:: $135.2M in Q3 and $364.7M YTD, with $217M remaining for PFAS projects (2025–2029).
  • Liquidity Strength:: $76M unrestricted cash, $45.6M restricted cash, and $255M credit line post-$370M financing.
  • Rate Case Progress:: California’s 2024 rate case faces delays, but inflationary offset ($0.30/share) and memo account approved.
  • PFAS Settlement Offset:: $35M in 3M proceeds (May–Sep) to reduce $217M PFAS investment costs.

Regulatory Updates and Rate Case Developments

The company's 2024 General Rate Case is ongoing, with an administrative law judge indicating that he may need additional time to process the rate case due to its size and complexity. However, the assigned Commissioner continues to stress the importance of getting decisions out on time or early. The judge authorized Cal Water to file a Tier 1 advice letter on January 1 for inflationary offset if the decision is delayed and granted a memo account to track and recover costs. As Greg Milleman commented, "we've spoken with the Commissioner 4 times during this time frame, and all 4 times, he's commented that he would like to see this decision moved out on a timely basis."

Capital Investments and Growth Prospects

Cal Water continues to invest in its water infrastructure, with $135.2 million in capital investments for the quarter and $364.7 million year-to-date. The company's capital investments do not include an estimated $217 million of remaining PFAS project expenses. The positive impact of the capital investment program on the regulated rate base is expected to result in a compounded annual rate base growth of almost 12%. Analysts estimate next year's revenue growth at 6.1%, indicating a continued growth trajectory.

Valuation and Dividend Metrics

With a P/E Ratio of 19.99, P/B Ratio of 1.5, and Dividend Yield of 2.71%, the company's valuation metrics indicate a relatively stable stock. The ROE of 8.09% and ROIC of 2.82% suggest a decent return on equity, while the Net Debt / EBITDA ratio of 3.86 indicates a manageable debt burden. The Free Cash Flow Yield of 6.75% is also attractive, suggesting a potential upside for income investors.

Outlook and Priorities

3. NewsRoom

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California Water Service Group Marks Half a Decade as One of “America's Most Responsible Companies” by Newsweek

Dec -04

Source: globenewswire.com

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California Water Leaders Gathering in San Diego for ACWA Fall Conference

Nov -24

Source: globenewswire.com

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California Water Service Group (NYSE:CWT) Receives Average Recommendation of “Buy” from Brokerages

Nov -22

Source: defenseworld.net

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California Water Service Group: Unattractive After Q3

Nov -20

Source: seekingalpha.com

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Hawaii Water Service Proposes First Rate Adjustment for Kapalua since 2021; Reflects Investments Made to Help Improve Reliability and Maintain Safe Utility Service

Nov -20

Source: globenewswire.com

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California Public Utilities Commission Grants California Water Service's Request to Postpone Cost of Capital Application to May 1, 2027

Nov -20

Source: globenewswire.com

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Ardurra Expands California Water Expertise with Acquisition of MKN & Associates

Nov -17

Source: businesswire.com

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Buy 3 Ideal Dividend Kings Of 24 'Safer' In November's 56

Nov -10

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.30%)

6. Segments

Supply and Distribution of Water and Providing Water-Related Utility Services

Expected Growth: 5.3%

California Water Service Group driven by increasing water demand and infrastructure investments

7. Detailed Products

Water Utility Services

California Water Service Group provides water utility services to residential, commercial, and industrial customers, including the delivery of clean and safe drinking water, wastewater collection, and treatment services.

Water Distribution Services

The company operates and maintains a vast network of water distribution systems, including pipes, pumps, and storage facilities, to ensure that water is delivered efficiently and reliably to customers across various communities.

Wastewater Collection and Treatment Services

California Water Service Group provides wastewater collection and treatment services, including the operation and maintenance of wastewater treatment plants, to protect public health and the environment.

Water Conservation Services

The company offers water conservation services, including water efficiency programs, leak detection, and repair services, to help customers reduce their water usage and conserve this valuable resource.

Water Quality Services

California Water Service Group provides water quality services, including water testing and analysis, to ensure that the water delivered to customers meets or exceeds regulatory standards.

8. California Water Service Group's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for California Water Service Group is low because the company provides essential services, and there are limited alternatives for customers to obtain water supply.

Bargaining Power Of Customers

The bargaining power of customers is medium, as customers have some flexibility to choose between different water service providers, but the cost of switching can be high, and the company has a strong market presence.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low, as the company has a diverse range of suppliers, and the cost of switching between them is relatively low, giving the company significant negotiating power.

Threat Of New Entrants

The threat of new entrants is low, as the water utility industry has significant barriers to entry, including high capital requirements, regulatory hurdles, and the need for specialized expertise.

Intensity Of Rivalry

The intensity of rivalry in the water utility industry is medium, as there are several large players, but the market is relatively stable, and companies tend to focus on their existing customer base rather than competing aggressively for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 45.78%
Debt Cost 5.09%
Equity Weight 54.22%
Equity Cost 7.77%
WACC 6.55%
Leverage 84.43%

11. Quality Control: California Water Service Group passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Otter Tail

A-Score: 6.6/10

Value: 5.3

Growth: 7.0

Quality: 6.5

Yield: 6.0

Momentum: 6.0

Volatility: 8.7

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Entergy

A-Score: 6.5/10

Value: 4.8

Growth: 3.6

Quality: 4.7

Yield: 7.0

Momentum: 9.0

Volatility: 10.0

1-Year Total Return ->

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ALLETE

A-Score: 6.4/10

Value: 5.9

Growth: 4.0

Quality: 4.3

Yield: 8.0

Momentum: 6.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Essential Utilities

A-Score: 6.0/10

Value: 5.3

Growth: 5.6

Quality: 5.4

Yield: 6.0

Momentum: 4.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
California Water Service

A-Score: 5.8/10

Value: 6.2

Growth: 5.4

Quality: 6.6

Yield: 5.0

Momentum: 2.5

Volatility: 9.0

1-Year Total Return ->

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Stock-Card
American States Water

A-Score: 5.4/10

Value: 4.6

Growth: 5.2

Quality: 5.7

Yield: 5.0

Momentum: 2.0

Volatility: 10.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

44.88$

Current Price

44.88$

Potential

-0.00%

Expected Cash-Flows