The Prudent Investor

A Quick Look at A Quick Look at SJW Corporation
January 10, 2007, 11:50 am
Filed under: Water Utilities

The third company in our list is SJW Corp. (NYSE:SJW), with a market cap of $745 Million.

Yahoo Finance description is as follows:

SJW Corp., through its subsidiaries, engages in the production, purchase, storage, purification, distribution, and retail sale of water in the United States. It provides water service to customers in the cities of Cupertino, San Jose, Campbell, Monte Sereno, Saratoga, Los Gatos, and Santa Clara. The company also provides non regulated water-related services, including water system operations, billings and cash remittances, and maintenance contract services. In addition, it owns and operates an eight acre surface lot parking facility, commercial properties, undeveloped real estate properties, and warehouse properties in the states of Florida and Connecticut; a retail property in the state of Texas; and holds a 70% limited partnership interest in 444 West Santa Clara Street, L.P. Further, the company engages in the sale and rental of water conditioning equipment in the metropolitan San Jose area. As of December 31, 2005, it served approximately one million people.

This apparently is not a pure water play, so if it survives past the first round then I will need to examine how much the property contributes to the company. I am really looking for a company whose primary concern is water, and do not wish it to be diluted (pun intended) with other concerns. Let’s see how the numbers look.

With a current price of $40.97, the P/E of 32.1 is close to the industry average. A PEG of 2 is significant because it is well below the industry average of 3.4, which is where the other two companies I have examined have been hovering. Its P/S of 4 is a bit higher than the industry average, but does not approach the 5.8 of WTR. Quarterly Revenue Growth of 8% is a tad higher than the industry average, but higher than the other two companies. Dividend Yield of 1.4% and Debt/Equity of 0.9 are similar to the other companies.

A look at the 2006 chart shows that the price hovered around $25 during the first half of the year, then began a steady climb to $40 during the second half. Had this company run too far too quickly?

This company remains in contention because of its PEG and Revenue Growth, as I do not see anything to remove it at this point.


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