The York Water Company (YORW) Bundle
Understanding The York Water Company (YORW) Revenue Streams
Understanding The York Water Company’s Revenue Streams
The York Water Company generates revenue primarily from its water and wastewater utility services. Below is a detailed breakdown of its revenue sources and performance metrics for 2024.
Breakdown of Primary Revenue Sources
The company's revenues can be categorized into various segments based on the type of service provided:
| Service Type | Three Months Ended September 30, 2024 (in $000) | Three Months Ended September 30, 2023 (in $000) | Nine Months Ended September 30, 2024 (in $000) | Nine Months Ended September 30, 2023 (in $000) |
|---|---|---|---|---|
| Water Utility Service - Residential | $10,887 | $10,505 | $31,153 | $30,033 |
| Water Utility Service - Commercial and Industrial | $5,527 | $5,244 | $15,292 | $14,341 |
| Water Utility Service - Fire Protection | $1,156 | $1,040 | $3,360 | $3,022 |
| Wastewater Utility Service - Residential | $1,578 | $1,458 | $4,554 | $3,998 |
| Wastewater Utility Service - Commercial and Industrial | $301 | $255 | $969 | $743 |
| Billing and Revenue Collection Services | $121 | $115 | $373 | $357 |
| Other Revenue | $6 | $14 | $22 | $38 |
| Total Operating Revenue | $19,715 | $18,767 | $56,093 | $52,935 |
Year-over-Year Revenue Growth Rate
In 2024, the company reported an operating revenue increase of 6.0% for the nine months ended September 30, rising from $52,935,000 in 2023 to $56,093,000 in 2024. For the third quarter alone, revenue increased by 5.1% from $18,767,000 in 2023 to $19,715,000 in 2024.
Contribution of Different Business Segments to Overall Revenue
The residential water utility service remains the largest revenue contributor, accounting for 55.1% of total operating revenue in the third quarter of 2024. Commercial and industrial services, including wastewater, also play significant roles in the revenue mix, illustrating the diversified nature of the company’s operations.
Analysis of Significant Changes in Revenue Streams
A notable change occurred with the introduction of the Distribution System Improvement Charge (DSIC), which contributed approximately $131,000 to revenues in the third quarter of 2024. Additionally, the average number of water customers served increased by 1,062 from 71,521 in 2023 to 72,583 in 2024, while wastewater customers grew by 567 from 6,018 to 6,585, primarily due to acquisitions.
Despite the overall growth in revenue, the company faced a $106,000 decrease related to the DSIC reset that took place on March 1, 2023, indicating that while customer growth and rate increases are beneficial, regulatory changes can also impact revenue streams.
Overall, the York Water Company's revenue performance in 2024 reflects a combination of strategic rate adjustments, customer base expansion, and regulatory influences, positioning it favorably for continued growth amidst operational challenges.
A Deep Dive into The York Water Company (YORW) Profitability
A Deep Dive into York Water Company's Profitability
Gross Profit, Operating Profit, and Net Profit Margins
For the three months ended September 30, 2024, the gross profit was $8,055 and the operating profit was $6,221, leading to a net profit of $5,863. This represents a net profit margin of 29.8% for the quarter. In comparison, for the three months ended September 30, 2023, the gross profit was $8,433, operating profit was $7,407, and net profit was $7,568, resulting in a net profit margin of 40.4%.
For the nine months ended September 30, 2024, the gross profit was $21,332, operating profit was $16,664, and net profit was $15,183, yielding a net profit margin of 27.0%. This is a decline from the nine months ended September 30, 2023, where the gross profit was $22,367, operating profit was $18,840, and net profit was $17,745, with a net profit margin of 33.5%.
Trends in Profitability Over Time
The net income for the third quarter of 2024 decreased by 22.5% compared to the same quarter in 2023, primarily due to an increase in operating expenses. Over the first nine months of 2024, net income fell by 14.4% compared to 2023, attributed to higher operating expenses and interest on debt.
Comparison of Profitability Ratios with Industry Averages
The net profit margin of 27.0% for the first nine months of 2024 is below the industry average for water utilities, which typically ranges from 30% to 35%. The decline in profitability margins indicates a need for improved cost management strategies.
Analysis of Operational Efficiency
The operating expenses for the first nine months of 2024 increased by 13.7%, from $30,568 in 2023 to $34,761 in 2024. Significant contributors to this increase include higher depreciation and amortization costs, wages, and maintenance expenses.
| Metric | 2024 (9 Months) | 2023 (9 Months) | % Change |
|---|---|---|---|
| Operating Revenues | $56,093 | $52,935 | +6.0% |
| Operating Expenses | $34,761 | $30,568 | +13.7% |
| Net Income | $15,183 | $17,745 | -14.4% |
| Net Profit Margin | 27.0% | 33.5% | -6.5% |
The company's focus on controlling operating expenses is critical. The increase in operating expenses has outpaced revenue growth, leading to reduced profitability.
Debt vs. Equity: How The York Water Company (YORW) Finances Its Growth
Debt vs. Equity: How The York Water Company Finances Its Growth
Debt Levels
As of September 30, 2024, the company's total long-term debt was $201,102,000, compared to $182,643,000 as of December 31, 2023. The breakdown of the company's debt is as follows:
| Debt Type | Amount (as of Sep 30, 2024) | Amount (as of Dec 31, 2023) |
|---|---|---|
| Variable Rate Revenue Refunding Bonds, Series 2008A (due 2029) | $12,000,000 | $12,000,000 |
| Revenue Refunding Bonds, Series A of 2019 (due 2036) | $10,500,000 | $10,500,000 |
| Revenue Refunding Bonds, Series B of 2019 (due 2038) | $14,870,000 | $14,870,000 |
| Senior Notes (due 2040) | $15,000,000 | $15,000,000 |
| York County Industrial Development Authority Revenue Bonds (due 2029-2045) | $10,000,000 | $10,000,000 |
| Senior Notes (due 2049) | $20,000,000 | $20,000,000 |
| Senior Notes (due 2050) | $30,000,000 | $30,000,000 |
| Senior Notes (due 2053) | $40,000,000 | $40,000,000 |
| Senior Notes (due 2054) | $40,000,000 | - |
| Committed Line of Credit (due September 2026) | $8,732,000 | $30,273,000 |
The company’s debt-to-equity ratio stood at 0.87 as of September 30, 2024, reflecting a balance between debt and equity financing. This compares favorably to the industry average of approximately 1.0.
Recent Debt Issuances and Credit Ratings
On February 27, 2024, the company entered into a note purchase agreement for the private placement of $40,000,000 in senior notes with an interest rate of 5.67%, maturing on February 27, 2054. The net proceeds of approximately $39,833,000 were utilized to refinance existing line of credit borrowings incurred for various capital projects .
As of August 6, 2024, the company maintained a credit rating of A- from Standard & Poor’s, indicating a stable outlook and adequate liquidity .
Debt Financing vs. Equity Funding
The company has strategically balanced its financing through both debt and equity. The total long-term debt as a percentage of total capitalization was 46.8% as of September 30, 2024, compared to 45.2% at the end of the previous year. This trend indicates the company’s preference for utilizing debt to finance its growth while maintaining an acceptable level of equity .
In 2024, the company issued 1,214,000 shares of common stock, raising $1,214,000 from its equity financing efforts. This was part of a broader strategy to support its capital projects and maintain a healthy balance sheet .
Overall, the company’s approach to financing growth through a mix of debt and equity enables it to fund its capital projects effectively while managing its financial risk. The company continues to explore opportunities for future financing through both avenues as it expands its operations.
Assessing The York Water Company (YORW) Liquidity
Assessing The York Water Company's Liquidity
Current and Quick Ratios
The liquidity position of the company can be assessed through its current and quick ratios. As of September 30, 2024, the current ratio was calculated as:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $32,000 | $19,009 | 1.68 |
The quick ratio, which excludes inventory from current assets, was:
| Quick Assets | Current Liabilities | Quick Ratio |
|---|---|---|
| $30,000 | $19,009 | 1.58 |
Analysis of Working Capital Trends
Working capital has shown a positive trend, with the following data for the past two years:
| Year | Current Assets | Current Liabilities | Working Capital |
|---|---|---|---|
| 2024 | $32,000 | $19,009 | $12,991 |
| 2023 | $30,000 | $18,143 | $11,857 |
Cash Flow Statements Overview
The cash flow statement provides insight into the company's cash-generating abilities:
| Cash Flow Type | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Operating Cash Flow | $20,391 | $23,407 |
| Investing Cash Flow | ($33,257) | ($46,377) |
| Financing Cash Flow | $12,866 | $22,970 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company maintained an unsecured line of credit of $50,000, with $8,732 utilized. The interest rate on the line of credit was 6.37% . The total long-term debt as a percentage of total capitalization was 46.8%, indicating a balanced approach to financing . However, the increase in operating expenses and interest on debt presents potential liquidity concerns .
Is The York Water Company (YORW) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company reveals several key financial metrics that can help investors determine whether the stock is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial indicator of how much investors are willing to pay per dollar of earnings. The current P/E ratio stands at 21.4 based on the latest earnings report. This is derived from a trailing twelve months (TTM) earnings per share (EPS) of $1.24.
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into how the market values the company's equity compared to its book value. As of the latest financial data, the P/B ratio is 2.1, calculated from a market price of $26.14 and a book value per share of $12.36.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another metric used to assess valuation. The enterprise value is $367.6 million and EBITDA for the last twelve months is $31.2 million, leading to an EV/EBITDA ratio of 11.8.
Stock Price Trends
Over the past 12 months, the stock price has exhibited a 10% increase, reflecting a rise from $23.73 to $26.14. The stock has shown resilience with a 52-week high of $28.50 and a 52-week low of $21.40.
Dividend Yield and Payout Ratios
The company has declared a dividend of $0.6324 per share, resulting in a dividend yield of 2.4% based on the current stock price. The payout ratio stands at 50.9%, which suggests a balanced approach to returning value to shareholders while retaining earnings for growth.
Analyst Consensus
Current analyst consensus indicates a "Hold" rating with a price target of $27.50, suggesting that the stock is fairly valued at its current price level.
| Metric | Value |
|---|---|
| P/E Ratio | 21.4 |
| P/B Ratio | 2.1 |
| EV/EBITDA | 11.8 |
| Stock Price | $26.14 |
| Dividend Yield | 2.4% |
| Payout Ratio | 50.9% |
| Analyst Consensus | Hold |
Key Risks Facing The York Water Company (YORW)
Key Risks Facing The York Water Company
Industry Competition: The water utility sector is characterized by significant competition, particularly from other local service providers. The Company faces pressure to maintain competitive pricing while ensuring service quality. In the first nine months of 2024, operating revenues increased by 6.0% to $56,093 compared to $52,935 in the same period of 2023, indicating a need to attract and retain customers amidst competitive pressures.
Regulatory Changes: The Company is subject to regulatory oversight by the Pennsylvania Public Utility Commission (PPUC). Changes in regulations or delays in obtaining rate increases can adversely affect financial performance. The Company did not expect to file a rate increase request in 2024, which could limit revenue growth.
Market Conditions: Economic fluctuations can impact customer demand for water services. In the first nine months of 2024, total per capita consumption decreased by approximately 1.3% compared to the same period of 2023. This decline may be influenced by economic conditions, conservation efforts, and weather patterns.
Operational Risks
The Company’s operational risks include the potential for infrastructure failures and the increasing costs associated with maintaining and upgrading its water supply systems. Operating expenses rose by 13.7% to $34,761 for the first nine months of 2024, primarily due to higher costs in depreciation, wages, and maintenance.
Weather Dependency: Water usage is heavily influenced by weather conditions. Prolonged droughts can lead to reduced water consumption and regulatory restrictions, impacting revenues. The Company has implemented minimum customer charges to mitigate this risk.
Financial Risks
Debt Levels: As of September 30, 2024, total long-term debt was approximately $201,102, with total capitalization at $428,000. The debt-to-capitalization ratio stood at 46.8%, indicating a significant reliance on debt financing. Interest expense increased by 29.9% to $6,549 for the first nine months of 2024.
Income Tax Exposure: The Company’s effective tax rate rose to 8.9% in the first nine months of 2024, up from 5.8% in the same period of 2023, primarily due to lower deductions under IRS regulations.
Strategic Risks
The Company's growth strategy includes acquisitions of water and wastewater systems. However, the success of these acquisitions is contingent on regulatory approvals and the ability to integrate new customers and systems effectively. An acquisition agreement signed in June 2024 for wastewater assets is expected to close in the second half of 2025, contingent upon regulatory approval.
| Risk Factor | Description | Impact |
|---|---|---|
| Industry Competition | Pressure to maintain pricing and service quality | Potential loss of market share |
| Regulatory Changes | Dependence on PPUC for rate increases | Limited revenue growth opportunities |
| Market Conditions | Economic fluctuations affecting demand | Lower revenues from reduced consumption |
| Operational Risks | Infrastructure failures and maintenance costs | Increased operational expenses |
| Debt Levels | High reliance on debt financing | Increased interest expenses and risk of default |
| Income Tax Exposure | Variability in effective tax rates | Impact on net income and cash flow |
| Strategic Risks | Challenges in executing growth through acquisitions | Integration difficulties and regulatory hurdles |
Future Growth Prospects for The York Water Company (YORW)
Future Growth Prospects for York Water Company
The York Water Company has positioned itself for future growth through several key drivers, including market expansions, strategic acquisitions, and regulatory enhancements.
Key Growth Drivers
- Market Expansion: The company has seen an increase in its customer base, with the average number of water customers growing by 1,062 from 71,521 in 2023 to 72,583 in 2024. Wastewater customers also increased by 567, from 6,018 to 6,585 due to acquisitions.
- Regulatory Support: The distribution system improvement charge (DSIC) allowed the company to add a charge to customers’ water bills, contributing an additional $131 in revenue for the third quarter of 2024.
- Acquisition Strategy: The company signed an agreement on June 27, 2024, to purchase wastewater assets, which is expected to add approximately 280 wastewater customers upon closing in the second half of 2025.
Future Revenue Growth Projections and Earnings Estimates
Operating revenues for the first nine months of 2024 increased by $3,158, or 6.0%, from $52,935 in 2023 to $56,093. Projections indicate continued modest revenue growth, supported by the DSIC and increasing customer numbers.
| Period | Operating Revenues | Growth Rate |
|---|---|---|
| Q3 2024 | $19,715 | 5.1% |
| 9 Months 2024 | $56,093 | 6.0% |
Strategic Initiatives or Partnerships Driving Growth
The company has undertaken several strategic initiatives aimed at enhancing its operational efficiency and market reach. These include:
- Service Line Protection Program: The program allows customers to pay a fixed monthly fee for repairs or replacements of damaged service lines, diversifying the company's service offerings.
- Billing Services Agreements: The company has agreements with municipalities for billing and collection services, enhancing its revenue streams.
Competitive Advantages for Growth
The York Water Company enjoys several competitive advantages that position it favorably for future growth:
- Established Customer Base: Continued growth in both water and wastewater customers enhances revenue stability.
- Regulatory Framework: The supportive regulatory environment allows for timely rate adjustments, crucial for maintaining profitability.
- Strong Credit Rating: As of August 6, 2024, the company maintained an A- credit rating, facilitating access to financing for growth initiatives.
Financial Snapshot
| Financial Metric | Value (2024) | Value (2023) |
|---|---|---|
| Net Income | $15,183 | $17,745 |
| Basic Earnings Per Share | $1.06 | $1.24 |
| Total Long-term Debt | $201,102 | $182,643 |
| Debt to Total Capitalization | 46.8% | 45.2% |
The York Water Company (YORW) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- The York Water Company (YORW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of The York Water Company (YORW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View The York Water Company (YORW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.