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The 7 Hottest Water Stocks to Own for 2023 and Beyond

Although investors frequently target technological innovators to generate profits in the market, the hottest water stocks to own leverages the power of the world’s most precious resource. True, 71% of the Earth’s surface is covered in water, making it appear a common commodity. However, only half a percent of the Earth’s water is drinkable.

Just that stat alone provides an immediate sharpening of the concept surrounding the hottest water stocks to own. Further, as the world’s population continues to increase, a mathematical conundrum materializes. For decades now, geopolitical experts warned that the wars of tomorrow could be fought over water, not oil.

For this discussion, I don’t want to get too macabre. However, it’s important to lay out the facts and not take this resource – or its management – for granted. With that in mind, below are the hottest water stocks to own for 2023 and beyond.

WTRG Essential Utilities $47.63
AWK American Water Works $156.19
YORW York Water $45.06
XYL Xylem $109.99
CWCO Consolidated Water $15.04
VEOEY Veolia Environment $25.95
SMR NuScale Power $10.36

Essential Utilities (WTRG)

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An American utility firm, Essential Utilities (NYSE:WTRG) has stakes in Illinois, Indiana, New Jersey, North Carolina, Ohio, Pennsylvania, Texas and Virginia. Per its public profile, Essential Utilities provides drinking water and wastewater treatment infrastructure and services. Currently, the company commands a market capitalization of $12.7 billion. On a year-to-date basis, WTRG dipped more than 8%. However, in the trailing month, shares gained 3%.

Last month, the company beat top-and-bottom line estimates for earnings and revenue. Essential delivered earnings per share of 26 cents, beating the consensus target of 23 cents. Further, it posted operating revenue of $435 million, easily exceeding analysts’ view of $376 million.

To be fair, the financials present somewhat of a mixed narrative. According to Gurufocus.com’s proprietary calculations for fair market value, WTRG rates as a modestly undervalued investment. However, the company’s balance sheet could use some work, particularly with a lowly Altman Z-Score that suggests higher-than-normal risk of bankruptcy. Still, with strong revenue growth and profit margins, Essential owns the goods to succeed. Therefore, it ranks among the hottest water stocks to own.

American Water Works (AWK)

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Another public utility firm, American Water Works (NYSE:AWK) through its subsidiaries provides water and wastewater services in the U.S. Per its public profile, the company offers water and wastewater services to approximately 1,700 communities in 14 states serving a population of approximately 14 million through 3.4 million customer connections. Since the start of the year, AWK gave up 14% of equity value. However, in the trailing month, shares gained over 8%.

As with Essential Utilities above, American Water could use some work in the balance sheet. Again, the Altman Z-Score is a bit distracting at 1.32, reflecting higher-than-normal bankruptcy risk. As well, it features a poor cash-to-debt ratio of only 0.01 times. Still, AWK attracts positive attention overall. Per TipRanks, the company features a moderate buy consensus view.

In addition, American Water has a three-year book growth rate of 7.4%, beating out over 67% of the competition. As well, its return on equity pings at 17.8%, reflecting superior capacity to convert equity financing into profits. Thus, it’s well worth consideration among the hottest water stocks to own.

York Water (YORW)

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An investor-owned, public utility company operating in Pennsylvania, York Water (NASDAQ:YORW) features a very rich history. Founded in 1816 by a group of local business men concerned about fire protection, York is the oldest company of its kind in this country. As well, it has the longest record of consecutive dividends since 1816.

Just for context, James Monroe was elected as POTUS in 1816. And while contemporary politics loves to mention the Founding Fathers, Monroe actually was one. Unfortunately for YORW stakeholders, heritage alone couldn’t save the underlying company from market volatility. Since the January opener, YORW dipped almost 7%. However, shares have enjoyed near-term momentum. In the trailing month, they gained 4.5%, possibly reflecting the early innings of a recovery.

Depending on the metrics you use, YORW runs between fairly valued to significantly overvalued. However, under these circumstances, people may continue to pay a premium for stability. Also, keep in mind that York is a decent-quality business, featuring a ROE of nearly 11%. Thus, it’s a solid idea for the hottest water stocks to own.

Xylem (XYL)

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Headquartered Rye Brook, New York, Xylem (NYSE:XYL) is a large American water technology provider, in public utility, residential, commercial, agricultural and industrial settings. Per its corporate profile, the company does business in more than 150 countries. Its products and services are focused in two areas: water infrastructure and applied water.

Since the start of the year, XYL comes in around 2% below parity. That’s a decent performance considering that during the same period, the benchmark equities index is down nearly 17%. However, shares really came alive during the back half of 2022. Specifically, in the trailing six months, XYL gained a whopping 50%.

To be fair, such a performance came at a cost. According to Gurufocus.com – against both its proprietary FMV calculations and traditional metrics – XYL rates as overvalued. On the plus side, Xylem’s Altman Z-Score hits 3.94, reflecting low bankruptcy risk. Also, Xylem is another decent quality enterprise with an ROE of 10%, making it one of the hottest water stocks.

Consolidated Water (CWCO)

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Based in the Cayman Islands, Consolidated Water (NASDAQ:CWCO) is an international water solutions company, supplying potable water, treating water for reuse, and manufacturing and providing water-related products and services. Its customer base covers the Bahamas, the U.S., the British Virgin Islands along with its home market.

If you’ve ever doubted the pertinence of the hottest water stocks to own for the future, just look at CWCO. Since the January opener, shares exploded higher to the tune of 45%. Better yet, the back half performance is similarly robust, with CWCO gaining nearly 21% in the trailing six months.

If anything, the one analyst that covers Consolidated Water likes it too, pegging it as a moderate buy. As well, the price target is $20, reflecting a respectable double-digit gain from the time-of-writing price of $15.58.

Per Gurufocus.com’s FMV calculation, CWCO is fairly valued. Investors should check out its balance sheet, particularly its robust cash balance. If you want a long-term idea, CWCO rates as one of the hottest water stocks to own.

Veolia Environment (VEOEY)

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Moving into the more speculative realm of the hottest water stocks to own, Veolia Environment (OTCMKTS:VEOEY) may intrigue market gamblers. A French transnational firm, Veolia features activities in three main service and utility areas traditionally managed by public authorities: water management, waste management and energy services.

In particular, Veolia may represent a compelling idea because of its expertise in desalination. Per its website, desalination allows converting seawater into a life sustaining and usable resource. As one of the holy grails at the intersection of science and economics, desalination works. However, getting the process to financially make sense represents another matter altogether.

Currently, VEOEY shareholders stare at a loss of over 27% in the charts. However, in the trailing month, the stock rebounded, gaining more than 5%.

Against forward earnings, VEOEY rates as a fairly valued investment. Performance metrics in the balance sheet and income statement run somewhere in the middle of the road: not great, not terrible. Nevertheless, if you like high-risk wagers, Veolia could be one of the hottest water stocks to own.

NuScale Power (SMR)

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To be completely upfront with you, NuScale Power (NYSE:SMR) is not a direct play among the hottest water stocks. Rather, the company plies its trade in the nuclear power industry. However, NuScale does things differently, specializing in small modular reactors. As the name suggests, SMRs occupy a smaller physical footprint and integrates the latest safety protocols. Therefore, these facilities can integrate in areas previously inaccessible for traditional nuclear powerplants.

What does this have to do with the world’s most precious resource? The combination of NuScale’s SMR technology and available desalination platforms can make the process of converting ocean water into potable water an economically viable enterprise. Per NuScale’s website, a single SMR coupled to a desalination plant can produce 77 million gallons of clean water.

To be fair, investors interested in SMR stock should realize that the underlying company presents risks. However, if you’re comfortable with market wagers, NuScale is easily one of the hottest water stocks to own.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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