Investment Review №336. Choosing a direction
Vadim Merkulov
Head of Analytics department
Global Water Resources. Essential services business
GWRS shares are attractive for purchase with a target price of $9.6
About company
Global Water Resources, Inc. (NASDAQ: GWRS) is a regulated water utility headquartered in Phoenix, Arizona. The company operates 39 water, wastewater, and recycled water systems across the Phoenix and Tucson metro areas, serving 68,130 active connections as of September 30, 2025. GWRS pursues consistent organic customer growth alongside a disciplined consolidation strategy, exemplified by its recent operational expansion in Pima County following the integration of acquired systems.
| Ticker | GWRS |
| Share price as of analysis | $8,50 |
| Target share price | $9,60 |
| Growth potential | 12,94% |
| Share price dynamics vs. indices | Day | Week | Month | Quarter | Year |
| GWRS | 1,2% | (1,2%) | 2,2% | (22,7%) | (25,3%) |
| S&P 500 | 0,6% | 0,9% | 1,6% | 3,4% | 19,6% |
| Russell 2000 | 0,8% | 3,0% | 3,8% | 6,2% | 19,9% |
| DJ Industrial Average | 0,5% | 1,0% | 3,4% | 6,6% | 18,0% |
| NASDAQ Composite Index | 0,8% | 1,2% | 0,7% | 3,0% | 23,5% |
Price dynamics GWRS, $
Investment Thesis
Regulatory environment supporting higher profitability. Progress in the 2025 Santa Cruz and Palo Verde rate cases, now in the evidentiary review stage with regulator-scheduled hearings, reflects significant advancement. A final decision expected in the first half of the year should enhance transparency in cost recovery and provide a foundation for improved profitability once the new rates are implemented.
Reduced sensitivity to inflationary pressures. The proposed Cost of Service Adjustment (CSA) mechanism is designed to limit regulatory lag by more quickly reflecting changes in the company’s cost structure, thereby improving the predictability of financial results. In addition, the implementation of CSA more closely aligns revenue with invested capital, ensuring more accurate and stable cost recovery amid rising expenses.
Strong organic growth. Total active connections increased 6.6% YoY, including 3.5% organic growth, reflecting sustained demographic trends and housing activity in the company’s key service areas. These growth rates exceed the U.S. water utility sector averages.
Modern infrastructure advantage. The company’s relatively young infrastructure base, further strengthened by ongoing AMI system deployments and recent asset upgrades, helps reduce the frequency of unplanned repairs. This, in turn, enhances operational efficiency while supporting the reliability and scalability of GWRS’s business model.
GWRS target price set at $9.60, with a “Buy” rating. Suggested stop‑loss positioned at $7.95.
| Ratio Analysis | 2024А | 2025E | 2026E | 2027E | 2028E | 2029E | 2030E |
| ROE | 12% | 5% | 7% | 11% | 11% | 12% | 12% |
| ROA | 1% | 1% | 1% | 2% | 2% | 2% | 2% |
| ROCE | 2% | 1% | 2% | 3% | 3% | 3% | 3% |
| Sales/Assets | 0,13x | 0,12x | 0,13x | 0,14x | 0,14x | 0,14x | 0,14x |
| Interest Coverage | 1,29x | 0,99x | 1,33x | 1,82x | 1,74x | 1,74x | 1,73x |
| Margins, % | 2022А | 2023А | 2024А | 2025E | 2026E | 2027E | 2028E | 2029E | 2030E |
| Gross margin | 17% | 23% | 18% | 14% | 18% | 23% | 24% | 25% | 26% |
| EBITDA margin | 47% | 51% | 49% | 46% | 49% | 52% | 52% | 51% | 52% |
| Net profit margin | 12% | 15% | 11% | 8% | 10% | 13% | 14% | 14% | 14% |
| Financials, $ mln | 2022А | 2023А | 2024А | 2025E | 2026E | 2027E | 2028E | 2029E | 2030E |
| Revenue | 44,73 | 53,03 | 52,69 | 55,77 | 62,5 | 69,95 | 72,87 | 73,9 | 76,84 |
| Operating Expenses | 36,91 | 40,74 | 43,33 | 47,79 | 51,1 | 53,8 | 55,42 | 55,21 | 57,04 |
| Operating Income | 7,82 | 12,29 | 9,36 | 7,98 | 11,4 | 16,15 | 17,45 | 18,69 | 19,8 |
| EBITDA, non-adj. | 21,02 | 27,12 | 25,73 | 25,52 | 30,46 | 36,43 | 38,16 | 37,95 | 39,6 |
| D&A | 9,89 | 11,44 | 12,72 | 13,98 | 15,44 | 16,58 | 16,92 | 15,38 | 15,83 |
| Net interest | -4,69 | -4,83 | -5,15 | -5,61 | -6,45 | -7,04 | -7,75 | -8,23 | -8,7 |
| EBT, non-adj. | 6,44 | 10,85 | 7,86 | 5,93 | 8,57 | 12,81 | 13,49 | 14,34 | 15,07 |
| Tax | -0,93 | -2,87 | -2,07 | -1,56 | -2,26 | -3,38 | -3,56 | -3,78 | -3,97 |
| Net Income, non-adj. | 5,51 | 7,98 | 5,79 | 4,36 | 6,31 | 9,43 | 9,93 | 10,56 | 11,1 |
| DPS | $0,30 | $0,30 | $0,30 | $0,30 | $0,30 | $0,31 | $0,32 | $0,34 | $0,35 |