We recently compiled a list of the eight best water stocks to invest in. In this article, we’ll take a look at where Primo Water Corporation (NYSE:PRMW) ranks among the best water stocks to invest in.
As the global demand for clean, safe drinking water continues to rise, the water industry is grappling with unique challenges and opportunities. According to the American Water Works Association’s (AWWA) State of the Water Industry Report, while there has been increased scrutiny of water quality and access standards, the sector is also facing challenges such as aging infrastructure, water scarcity, new contaminants, and evolving cybersecurity. facing pressure from threats. These converging challenges make it imperative for industry professionals to adopt innovative solutions, foster collaboration, and invest strategically in talent and technology.
This dynamic situation poses both risks and opportunities for investors looking to enter the water sector. Companies operating in this sector focus not only on ensuring reliable access to potable water, but also on pioneering technologies that address complex issues such as water purification, water distribution, and resource management. I am. The report notes that protection of watersheds and source waters, once considered a secondary concern, is now a top priority for water utilities. This change reflects growing awareness of the importance of protecting water sources to maintain a sustainable and affordable supply.
In 2024, watershed protection overcomes the long-standing challenge of aging infrastructure, a long-standing concern for water utilities. A variety of factors are contributing to this change, including the effects of long-term climate change, drought conditions, and the threat of pollutants such as per- and polyfluoroalkyl substances (PFAS). PFAS are a major water quality concern because they are found in many industrial products and can harm public health. Addressing this issue alone is expected to cost the industry nearly $40 billion in capital improvement investments. This highlights the financial and operational hurdles water companies must overcome, making this a pivotal year for those on the front lines of water resources management.
Despite these challenges, the industry is taking proactive steps to strengthen water quality and infrastructure resilience. The Bipartisan Infrastructure Act (BIL) provides some relief by providing funding to support capital projects, which in turn helps address concerns about aging systems. Utilities are also increasing implementation of water protection plans, with more than 61% of respondents in the AWWA survey saying they have already integrated or are in the process of integrating source water protection efforts. This proactive stance demonstrates the sector’s commitment to long-term sustainability.
the story continues
One of the most important developments in the water industry is the integration of new technologies. Investment in digital solutions, advanced treatments and green alternatives is expected to more than double over the next 1-3 years. The introduction of such technology is considered “very important” for utilities and “very important” for service providers, according to the AWWA report. The focus is on maximizing the lifespan and performance of existing systems, while exploring environmentally friendly innovations that can strengthen the resilience of water systems. This creates fertile ground for the growth of companies dedicated to advancing technology, meeting the industry’s growing demand for efficient and sustainable solutions.
Another pressing issue for the water industry is cybersecurity. As utilities become more reliant on digital infrastructure, they become more vulnerable to cyber threats, posing significant risks to the privacy of water utilities and customer data. The survey found that 67% of participants considered cybersecurity to be a “very” to “extremely” important issue, and 82% said cyber threats would have a “mild” to “significantly negative” impact on the water sector. It turned out that he thought to give. Despite these concerns, small utilities often lack the resources to strengthen their cybersecurity posture, creating security gaps that can lead to significant disruption. Addressing these vulnerabilities is critical as utilities seek to protect their operations from growing cyber threats.
Looking to the future, water utilities must continue to adapt and innovate to meet the industry’s evolving challenges. For example, climate change and associated extreme weather events are increasing threats to water resources and infrastructure. Drought, water scarcity, and unpredictable weather patterns make it imperative for utilities to adopt robust water management strategies. As a result, companies that provide solutions for water conservation, infrastructure renewal, and climate change are well-positioned to take advantage of these emerging trends.
The water industry’s focus on water source protection, technological innovation, and infrastructure resilience, coupled with cybersecurity and climate change initiatives, makes it an attractive sector for investors. Companies that lead in these areas have the potential to generate significant profits while contributing to the sustainability and security of the world’s water resources. In the following sections, we will consider some of the best water resources for investment and analyze their strategies, performance, and growth potential in this complex and ever-evolving industry.
our methodology
In this article, we scoured ETFs and online rankings to identify 15 potentially active companies in the water industry. We then selected the eight stocks most widely held by hedge funds as of Q2 2024. The list is ordered by the number of hedge fund holders in each company.
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Primo Water Corporation (NYSE:PRMW)
Number of hedge fund holders: 31 people
Primo Water Corporation (NYSE:PRMW) is considered a water resource because it provides high-quality water solutions, from spring water and purified water to advanced water filtration products. The company offers a diverse range of products, including bottled water, dispenser units, and water filtration systems, serving residential and commercial customers. As of the second quarter of 2024, 31 hedge funds hold the stock, an increase from 27 in the previous quarter, indicating growing confidence among institutional investors.
Primo Water Corporation (NYSE:PRMW)’s second-quarter earnings report highlighted the company’s strong financial performance despite missing expected EPS. Reported EPS was $0.09912, below expectations of $0.25, but overall fundamentals remain positive. Total revenue for the quarter was $485 million, an increase of 7.6% from the prior year period, balanced by 3.1% volume growth and 4.5% price growth. This revenue growth was driven by organic growth of 6.6%, reflecting healthy consumer demand and strength across Primo’s broad water solutions portfolio.
The company’s adjusted EBITDA soared to $113 million, an impressive 15% year-over-year increase. Notably, EBITDA margin expanded to 23.3%, exceeding the high end of management’s guidance. This demonstrates Primo Water Corporation’s (NYSE:PRMW) ability to control costs and improve profitability in a challenging economic environment. This margin expansion, coupled with improved free cash flow generation rates, highlights the company’s strong financial health and operating efficiency.
Primo Water Corporation’s (NYSE:PRMW) growth is also supported by strong demand for premium products such as Mountain Valley Spring Water, which saw retail revenue increase 87%. The company’s focus on sustainability and responsible water source management further strengthens its market position as a leading player in the North American water sector.
The acquisition of BlueTriton Brands is expected to provide significant synergies and increase market share for Primo Water Corporation (NYSE:PRMW), providing another catalyst for future growth. As consumers continue to prioritize healthier lifestyles and sustainable water solutions, Primo Water Corporation (NYSE:PRMW) is well-positioned to benefit from these long-term trends. With balanced revenue streams between residential and commercial customers, Primo Water Corporation (NYSE:PRMW) remains an attractive investment in the growing water sector.
Carillon Chartwell Small Cap Value Fund said the following about Primo Water Corporation (NYSE:PRMW) in its Q2 2024 Investor Letter:
“Primo Water Corporation (NYSE:PRMW) sells and distributes water, water dispensers, and filtration systems to residential and commercial customers throughout the United States. Investors were excited by strong results as unit volumes began to increase.The company also received praise for announcing the sale of its European business.Later in the quarter, the company announced a merger with another major water company. This should result in significant integration synergies.”
Overall, PRMW ranks third on the list of best water resources for investment. While we acknowledge that PRMW has the potential for growth, we believe that some AI stocks are more likely to deliver higher returns and do so in a shorter time frame. . If you’re looking for AI stocks with more promise than PRMW, but trading at less than 5x earnings, check out our report on the cheapest AI stocks.
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Disclosure: None. This article originally appeared on Insider Monkey.
