China Everbright Water Limited (SGX:U9E), a S$1.10B small-cap, is a utility company operating in an industry which faces recent trends of rising cybersecurity threats, increasing usage by consumers and growing number of innovative competitors. Utilities analysts are forecasting for the entire industry, a positive double-digit growth of 11.89% in the upcoming year , and an optimistic near-term growth of 18.27% over the next couple of years. This rate is larger than the growth rate of the Singapore stock market as a whole. Today, I will analyse the industry outlook, and also determine whether China Everbright Water is a laggard or leader relative to its utilities sector peers. View our latest analysis for China Everbright Water

What’s the catalyst for China Everbright Water’s sector growth?

Moving forward, key issues facing utility companies include climate change and environmental concerns, and new entrants and disruptive technology. Over the past year, the industry saw growth of 8.82%, though still underperforming the wider Singapore stock market. China Everbright Water leads the pack with its impressive earnings growth of 59.10% over the past year. However, analysts are expecting its future earnings growth to be more in-line with the industry average, hovering at 11.63% over the next couple of years.

Is China Everbright Water and the sector relatively cheap?

Water utility companies are typically trading at a PE of 15.52x, relatively similar to the rest of the Singapore stock market PE of 13.85x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a higher 12.01% compared to the market’s 7.29%, potentially illustrative of past tailwinds. On the stock-level, China Everbright Water is trading at a PE ratio of 11.18x, which is relatively in-line with the average water utilities stock. In terms of returns, China Everbright Water generated 6.98% in the past year, which is 5.03% below the utilities sector.

Next Steps:

China Everbright Water’s future growth prospect aligns with that of the broader market and it is trading in-line with its peers. So if you like its growth prospects, you’ll be paying a fair value for the company. If the stock has been on your watchlist for a while, now may be the time to enter. However, before you make a decision on the stock, I suggest you look at China Everbright Water’s fundamentals in order to build a holistic investment thesis.

1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.

2. Historical Track Record: What has U9E’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of China Everbright Water? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.