Essential Utilities, Inc.

Section 1: Company Overview and Fundamentals

1.1Company Overview:

Essential Utilities, Inc. (NYSE: WTRG) is a holding company for regulated utilities providing water, wastewater, or natural gas services. The Company’s segments include the Regulated Water segment and the Regulated Natural Gas segment.

Kalkine’s Diversified Opportunities Report covers the Company Overview, Key positives & negatives, Investment summary, Key investment metrics, Top 10 shareholding, Business updates and insights into company recent financial results, Key Risks & Outlook, Price performance and technical summary, Target Price, and Recommendation on the stock.

Stock Performance:

• The stock has corrected by 13% in the last three months on the other hand given a return of 3.35% in past six months.
• The stock is in its lower band of its 52-week range of USD 44.05 and 52-week low price of USD 32.07. Post the announcement of FY23 results the stock has corrected by 4.95% with the current price at a current important support of USD 32-USD 34.
• The price is currently trading below both its long-term (200-day) SMA and its short-term (50-day) SMA , with the current RSI of 41.82.

1.2 The Key Positives, Negatives, and Investment summary

1.3 Top 10 shareholders:

The top 10 shareholders together form ~42.61% of the total shareholding, signifying diverse shareholding. The Vanguard Group, Inc. and BlackRock Institutional Trust Company, N.A. are the biggest shareholders, holding the maximum stake in the company at ~10.15% and ~8.08%, respectively.

1.4 Key Metrics

The data shows Essential Utilities Inc. (WTRG) experienced significant fluctuations in revenue over the period from 2019 to 2023, with an initial increase in 2020 followed by a peak in 2022, then a slight reduction in 2023. However, despite the revenue fluctuations, the company demonstrated overall growth in operating profit throughout the period. This suggests that Essential Utilities managed to effectively control costs and optimize its operations to maintain profitability despite changes in revenue.

The operating margin, which represents the efficiency of the company's operations in generating profits from revenue, showed a mixed trend. It initially declined from 36.15% in 2019 to 28.90% in 2022, indicating a decrease in operational efficiency. However, it rebounded to 33.70% in 2023, suggesting that the company implemented measures to improve efficiency and profitability. Overall, while Essential Utilities faced revenue volatility over the period, its ability to maintain and grow operating profit demonstrates resilience and adaptability in managing its operations.

Section 2: Business Updates and Corporate Business Highlights

2.1 Recent Updates:

The below picture gives an overview of the recent updates:

2.2 Insights of FY23:

Section 3: Key Risks & Outlook

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

Stock Performance:

• The stock has corrected by 13% in the last three months on the other hand given a return of 3.35% in past six months.
• The stock is in its lower band of its 52-week range of USD 44.05 and 52-week low price of USD 32.07. Post the announcement of FY23 results the stock has corrected by 4.95% with the current price at a current important support of USD 32-USD 34.
• The price is currently trading below both its long-term (200-day) SMA and its short-term (50-day) SMA , with the current RSI of 41.82.

4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is April 17, 2024. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

 Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

 Stop-loss: It is a level to protect against further losses in case of unfavorable movement in the stock prices.

Disclaimer

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