Operating Margin - California Water Service Group (NYSE:CWT)

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Price: 43.86 USD -0.23%

Market Cap: 2.6B USD

21.1%

Current

16%

Average

13.8%

Industry

Operating Margin represents how efficiently a company is able to generate profit through its core operations.

Higher ratios are generally better, illustrating the company is efficient in its operations and is good at turning sales into profits.

Operating Margin

21.1%

Operating Profit

209.1m

Revenue

990.7m

Operating Margin Across Competitors

Country		Company	Market Cap	Operating Margin
US		California Water Service Group NYSE:CWT	2.6B USD	21%
US		American Water Works Company Inc NYSE:AWK	26B USD	37%
BR		Companhia de Saneamento Basico do Estado de Sao Paulo SABESP BOVESPA:SBSP3	92.5B BRL	44%
US		Essential Utilities Inc NYSE:WTRG	10.9B USD	39%
UK		United Utilities Group PLC LSE:UU	8.1B GBP	36%
UK		Severn Trent PLC LSE:SVT	8.1B GBP	29%
BR	B	Basic Sanitation Company of the State of Sao Paulo SABESP SWB:SAJA	6B EUR	44%
HK		Guangdong Investment Ltd HKEX:270	44.7B HKD	45%
CN		Grandblue Environment Co Ltd SSE:600323	23.8B CNY	23%
UK		Pennon Group PLC LSE:PNN	2.5B GBP	19%
HK		Beijing Enterprises Water Group Ltd HKEX:371	25.2B HKD	21%

California Water Service Group
Glance View

Economic Moat

None

Market Cap

2.6B USD

Industry

Utilities

California Water Service Group (Cal Water) has emerged as a reliable pillar in the water utility sector, rooted in a history that began in 1926. Headquartered in San Jose, California, the company operates as the third-largest publicly traded water utility in the United States. Cal Water serves more than two million people across California, Washington, New Mexico, and Hawaii, managing an intricate network of water systems that ensure communities have access to clean and safe water. This coverage is achieved through a combination of regulated and unregulated services, whereby the company is largely overseen by regulatory bodies that approve rates charged for water delivery. This regulatory framework offers stability, allowing predictable revenue streams, while the company invests heavily in infrastructure to maintain and expand its services. The heart of Cal Water's business model is delivering reliable water services, which involves sourcing, treating, and distributing water to residential, commercial, industrial, and public entities. Revenue is primarily generated by billing customers for the water consumption through metered services. The rates are determined based on regulatory approval, which ties them to ongoing infrastructure investments and operational costs. Despite the challenges posed by environmental regulations and drought conditions, Cal Water has consistently focused on sustainability initiatives by integrating advanced technologies for water conservation, improving efficiencies, and reducing waste. These commitments not only enhance their operational robustness but also ensure compliance with increasingly stringent environmental standards, securing Cal Water's position as a vital entity in managing essential resources for the regions it serves.

View CWT Analysis

CWT Intrinsic Value

What is Intrinsic Value?

Economic Moat is a concept popularized by Warren Buffett to describe a company's durable competitive advantage. It represents the 'moat' that protects a company from competitors and helps it sustain profitability over the long term. Our analysis of the past 10 years showed that companies with a wide economic moat significantly outperformed the market, delivering +645% returns compared to +189% for the S&P 500.

Our research into Economic Moat performance spans the past 10 years and focuses on companies with a wide economic moat. For this analysis, we calculated the average stock price returns of these companies, comparing them to the performance of the S&P 500 index over the same period.

The results were compelling: wide moat stocks achieved a remarkable +645% average return, compared to +188% for the broader market. This difference highlights the long-term benefits of investing in businesses that can maintain their market position and pricing power over time.

Note: This research does not account for survivorship bias. Past performance is not indicative of future results.

Determining whether a company has an economic moat requires both a deep dive into financial metrics and a qualitative assessment of its competitive position. Our analysts conduct a rigorous evaluation that focuses on identifying structural advantages that enable a company to sustain profitability and defend its market share over the long term.

The process begins with an analysis of a company’s historical financial performance. We assess how consistently the company has generated returns above its cost of capital and whether those returns have been stable or improving. However, financial performance alone doesn’t reveal the full picture. To understand the sources of these advantages, we evaluate five key drivers of economic moats:

Network Effect: We analyze whether the value of a company’s product or service grows as its user base expands. Platforms like payment systems or marketplaces benefit from this self-reinforcing.

Switching Costs: We assess whether customers face significant costs or disruptions when switching to a competitor’s product or service. High switching costs create customer stickiness and provide pricing power.

Intangible Assets: Strong brands, patents, and regulatory licenses can protect a company’s market position by creating barriers for competitors or enabling premium pricing. For example, a well-recognized consumer brand may command higher customer loyalty and margins.

Efficient scale: Occurs when a market is optimally served by one or a few players, making it unprofitable for new entrants to compete. This typically happens in industries with high fixed costs or geographic constraints, such as utilities or pipelines.

Cost Advantage: Companies with structural cost advantages can produce goods or services at a lower cost than their competitors, enabling them to offer competitive pricing or maintain higher margins. These advantages often arise from economies of scale, superior supply chain management, or proprietary technology. Firms like Walmart leverage their massive scale to negotiate better terms with suppliers, allowing them to undercut competitors on price.

By examining these factors in combination with a company’s financial performance and market positioning, we classify each company into one of three categories:

This rigorous evaluation ensures that our moat ratings are both comprehensive and reliable, giving investors the tools they need to make well-informed, long-term decisions.

The AI Assistant may sometimes provide inaccurate information.

Make your own investment decisions or consult a licensed financial advisor.

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California Water Service Group
NYSE:CWT