AWK, American Water Works Company, Inc.
Read top to bottom, the owner's questions in the order an owner asks them: what the business is, whether the record holds, whether it survives and is any good, and what you would be paying. New to the questions? Start with the Method.
The business in brief
read the 10-K →What this business is and what moves its needle, read from the numbers in its filings. The quantitative detail is in the sections below; the verdict is left to you.
- What it is
- A capital-intensive business, run on heavy physical assets that have to be kept working.
- Situation
- Capital build-out. capital spending has surged to 61% of sales, today's earnings are charged less depreciation than tomorrow's will be.
- What moves the needle
- How hard the assets work, and what the inputs cost. What decides it: utilization, how much of the capex merely keeps the assets running, and what a downturn does to a heavy fixed-cost base.
- Is it a good business?
- Return on capital has rarely cleared the cost of capital (median 6%, above 15% in 0 of 10 years). Owner earnings, the cash-based check, have been thin too. This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the 10-K is where you look.
Every line here is arithmetic from the company's own filings, not a model's opinion, and each figure appears in full in the sections below.
The record, 2013–2025
realized figures from each filing, no estimates| 2013’13 | 2014’14 | 2018’18 | 2019’19 | 2020’20 | 2021’21 | 2022’22 | 2023’23 | 2024’24 | 2025’25 | TTMTTMMar 2026 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| RevenueRevenue | $2.9B | $3.0B | $3.4B | $3.6B | $3.7B | $3.9B | $3.8B | $4.2B | $4.7B | $5.1B | $5.2B |
| Operating marginOp. mgn | 32.9% | 33.3% | 32.3% | 33.8% | 33.3% | 30.6% | 33.8% | 35.7% | 36.9% | 36.7% | 36.6% |
| Net incomeNet inc. | $369M | $423M | $567M | $621M | $709M | $1.3B | $820M | $944M | $1.1B | $1.1B | $1.1B |
| EPS (diluted)EPS | $2.06 | $2.35 | $3.15 | $3.43 | $3.90 | $6.94 | $4.51 | $4.89 | $5.39 | $5.70 | $5.65 |
| Owner earningsOwner earn. | ($84M) | $141M | ($200M) | ($271M) | ($396M) | ($323M) | ($1.2B) | ($701M) | ($811M) | ($1.1B) | ($1.2B) |
| ROICROIC | 6% | 6% | 6% | 6% | 6% | 5% | 6% | 6% | 6% | 6% | 6% |
| CapexCapex | $980M | $956M | $1.6B | $1.7B | $1.8B | $1.8B | $2.3B | $2.6B | $2.9B | $3.1B | $3.2B |
| Capex / revenueCapex/rev | 34.0% | 31.7% | 46.4% | 46.1% | 48.7% | 45.1% | 61.0% | 61.1% | 61.4% | 61.0% | 62.4% |
| Capex vs depreciationCapex/dep | 2.41× | 2.25× | 2.91× | 2.84× | 3.02× | 2.77× | 3.54× | 3.66× | 3.62× | 3.50× | 3.54× |
| Total debtDebt | $5.2B | $5.5B | $7.6B | $8.7B | $9.7B | $10.3B | $10.9B | $11.7B | $12.5B | $12.8B | $12.8B |
| Cash & investmentsCash+inv | $27M | $23M | $130M | $60M | $547M | $116M | $85M | $330M | $96M | $98M | $137M |
| Net debt / (cash)Net debt | $5.2B | $5.5B | $7.5B | $8.6B | $9.1B | $10.2B | $10.8B | $11.4B | $12.4B | $12.7B | $12.6B |
Owner’s Scorecard
Will it survive?
- AdequateOperating income $1.9B ÷ interest expense $615M
Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.
- HighTotal debt $12.8B ÷ operating income $1.9B
Years of operating profit it would take to repay all debt. A first read, not a credit rating: it's gross debt (not netted against cash) over EBIT (not EBITDA), and a cyclical year distorts it.
- Debt, net of cash $12.7BHeavy net debtCash $98M − debt $12.8B
Netting $98M of cash and short-term investments against $12.8B of debt leaves $12.7B owed, about 6.7× a year's operating profit, versus the gross figure above. Net debt is the leverage figure that matters; the gross ratio above ignores the cash already set against it. Strategic or illiquid investments aren't counted here.
- Not enough data
The filing data didn't include the inputs for this check.
Is it a good business?
- Below averageNOPAT $1.5B ÷ invested capital $23.5B (debt + equity − cash)
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; below ~8% the company may destroy value as it grows. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
- Consumes cashOwner Earnings ($1.1B) = operating cash $2.1B − capex $3.1B
What an owner could take out without starving the business. That's -21% of revenue. Treating stock comp as the real expense it is (less $13M of SBC) leaves ($1.1B). Honest caveat: capex here blends maintenance and growth, so steady-state Owner Earnings may run higher (see capex vs. depreciation).
- Cash-backedCash from ops $2.1B ÷ net income $1.1B
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.
How is the cash used?
- No surplus to allocate
The business didn't generate positive Owner Earnings this year, so any distributions came from the balance sheet or borrowing, not from operations.
- Investing or harvesting? 3.50×ExpandingCapex $3.1B ÷ depreciation $894M
Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.
Durability & moat, 2013–2025
A moat is a high return that doesn’t fade, reinvested at high returns. Here is what the record says, judgments, not another chart of the numbers.
- Profitable years 10 of 10
Never lost money over the record, the earnings stability Graham insisted on.
- Return on capital ≥ 15% 0 of 10 yrs
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
- Operating margin 33% (FY2013) → 37% (FY2025)
Margins widened over the record, pricing power intact or improving.
- Reinvestment, incremental ROIC 6%
Reinvested capital earned only a modest return, growth is getting expensive.
- Worst year 2021 · 30.6% op. margin
Stayed profitable even in its hardest year, the resilience that survives recessions.
- Share count +0.7%/yr
Roughly flat share count, little dilution, little buyback.
- Dividend record rising
Paid and raised the dividend across the record, the continuity Graham prized.
Solvent is not the same as cheap; growing is not the same as good. These are vital signs, not a verdict, the judgment is yours, and the filing is one click away.
How the cash was used, 2013–2025
Over the record, the business generated $14.7B of operating cash, and how management split it is, as Buffett insists, the job that matters most. Here it reads as a reinvestor, most operating cash is plowed back into the business.
- Reinvested$19.6B · 133%
- Dividends$4.1B · 28%
- Buybacks$81M · 1%
It reinvested $19.6B (133%) back into the business and returned $4.2B (28%) to owners, $4.1B in dividends, $81M in buybacks. Total debt rose $7.5B across the span. It returned and reinvested more than it generated, the gap was covered by debt or existing cash.
Buybacks are gross of stock issued to employees; net of that, the real return to owners is lower (see Management & pay). And the mix alone doesn't grade management, what matters is the return earned on the dollars reinvested (see incremental ROIC in the durability report).
Management & pay
Two questions Buffett actually asks about pay: is stock compensation, a real expense, whatever the income statement pretends, quietly large, and is the top wildly out of line with the floor. He's no populist about it; he just wants pay that's rational and earned, and comp committees that aren't lapdogs.
- Stock-based compensation$13M
The slice of the business handed to employees in shares this year, 0% of revenue, equal to 1% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. And note the trap, the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.
Graham’s defensive-investor test
4 of 6 metGraham gave the defensive investor seven numerical criteria in The Intelligent Investor. Here they are, run mechanically on the filings, his framework, not our verdict. Meeting them is a floor of safety, not a reason to buy; missing one is no veto, since many fine modern businesses fail his strictest liquidity tests by design. The worth is in seeing exactly where a company stands against the canon, every number sourced.
- Adequate size PassRevenue ≥ $2B · $5.1B
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
- Strong liquidity MissCurrent ratio ≥ 2× · 0.46×
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
- Conservative debt MissDebt ≤ working capital · $12.8B vs ($2.6B) WC
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
- Earnings stability PassA profit every year (10-yr record) · no losses
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
- Dividend record PassUninterrupted dividends · paid every year (10)
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
- Earnings growth PassEarnings +33% over the record · +129%
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
- Moderate price —P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Earnings are $5.70/share and book value $55.57/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.
Graham would be the first to say a checklist is a starting point, not an answer. These are his defensive, bargain-hunter's tests, the cigar-butt lens. Buffett and Munger grew past it, paying fair prices for wonderful businesses; that lens lives in the moat and owner-earnings work above, and both still matter. Clearing Graham’s tests earns a closer look; failing them earns harder questions, not a dismissal.
What the price implies
reverse-DCFOwner earnings are negative today, so the usual reverse-DCF has nothing to grow. But that's exactly when a price makes its boldest promise. So we flip the question: type a price, and see the future profitability you'd have to believe to justify it.
Enter a price to run it.
It flips the reverse-DCF: the company must reach owner earnings that, valued at a mature multiple and discounted back at your rate, equal today's market cap, shown as the margin it must earn on revenue grown at your rate, from negative today. For a deep cyclical at a trough, normalized through-cycle earnings are the better lens; this is for the genuinely unprofitable.
What the filing emphasizes, FY2025
read the 10-K →Each year a 10-K must name what could go wrong, in the company's own words. Here are the ones Graham and Buffett would stop on, each set against the figure from the same filings that bears on it, anchored to a period you can find in the record above. We point; the judgment is yours.
- Supplier & input dependenceRisk Factors
A choke point upstream. A sole or limited supplier can dictate terms, and a single shortage can stop the line.
“We also rely on a limited number of mutual insurance companies for a significant portion of our insurance coverage and any disruption in these markets or changes in the terms offered by these companies could materially increase our costs or limit our ability to obtain adequate insurance.”
A judgment, not a number, weigh it against the filing yourself. - Concentrated dependenceRisk Factors
What the whole business leans on, a product, a platform, a partner. Concentration cuts both ways, and the filing is where management has to admit it.
“Our ability to meet the existing and future demand of our customers depends on the availability of an adequate supply of water.”
From the recordOwner-earnings margin at stake (TTM)−23% - Debt terms & refinancingMD&A
The fine print behind the debt. Covenants and near-term maturities decide who is really in control when a year goes badly.
“To the extent that the Company is not in compliance with these covenants, an event of default may occur under one or more debt agreements and the Company, or its subsidiaries, may be restricted in its ability to pay dividends, issue new debt or access the revolving credit facility.”
From the recordBalance sheet (TTM)$12.7B heavy net debt · interest covered 3.1× - Litigation & contingenciesRisk Factors
Claims an owner inherits. Most disclosure is boilerplate; this fires only on an actual matter, a named suit, a settlement, a contingency, a number.
“We may be the target of securities class action and derivative lawsuits which could result in substantial costs and may delay or prevent the proposed Essential merger from being completed.”
A judgment, not a number, weigh it against the filing yourself. - Regulation & policyBusiness
Rules that can rewrite the economics, tariffs, antitrust, data, export controls.
“CA, IL Consolidated utility tariffs Use of a unified rate structure for water systems owned and operated by a single utility, which may or may not be physically interconnected.”
A judgment, not a number, weigh it against the filing yourself.
What changed, FY2025 vs FY2024
read the 10-K →Most of a 10-K is boilerplate carried over verbatim; the signal is in what's new. These lines appear this year and weren't there last, figure updates filtered out, so only the language shift remains.
- “Key changes include the permanent extension of certain provisions from the Tax Cuts and Jobs Act of 2017, such as 100% bonus depreciation and Section 163(j) interest limitation exception for regulated utilities, as well as the immediate expensing of domestic research and development costs, and the i…”
- “The application also requests approval of a Fixed Cost Recovery Account, which is intended to be a full decoupling mechanism that would allow the California subsidiary to recover authorized fixed costs, regardless of sales volume, while also providing incentives, via progressive conservation-oriente…”
- “District Court for the District of South Carolina, against manufacturers of certain PFAS for damages, contribution and reimbursement of costs incurred and continuing to be incurred to address the presence of such PFAS in public water supply systems owned and operated by these utility subsidiaries an…”
- “In 2025, cash flows provided by operating activities increased $14 million, primarily due to an increase in net income and depreciation, partially offset by the payment of CAMT liability, utilization of income tax receivables in the prior year and higher customer receivables and unbilled revenues in…”
- “Risks Related to the Proposed Merger with Essential The proposed merger is subject to various closing conditions, including the receipt of consents and approvals from various governmental and regulatory entities and third parties, and a failure to obtain all such consents or approvals or to satisfy …”
Classic text analysis over the filing itself, no model wrote a word of this, and every quote is the company's own.
Peers, Water utilities
The same industry, side by side on owner economics, compare, don't rank by a single number.● marks best in the group.
| Company | Revenue | Gross margin | Op. margin | ROIC | Owner earn. margin |
|---|---|---|---|---|---|
| WECWEC Energy Group, Inc. | $9.8B | 67% | 22.9% | 6% | 7% |
| CNPCenterpoint Energy Inc | $9.3B | 100% | 22.6% | 5% | -26% |
| PPLPPL Corp | $9.2B | — | 23.2% | 5% | -15% |
| AEEAmeren Corp | $8.8B | — | 23.0% | 6% | -9% |
| CMSCMS Energy Corp | $8.3B | — | 20.8% | 5% | -2% |
| NINisource Inc. | $6.5B | 76% | 28.1% | 6% | -6% |
| AWKAmerican Water Works Company, Inc. | $5.1B | — | 36.7% | 6% | -21% |
| ATOAtmos Energy Corp | $4.7B | 69% | 33.2% | 6% | -32% |