Financial Review: H2O Innovation (OTCMKTS:HEOFF) and H2O America (NASDAQ:HTO)

H2O Innovation (OTCMKTS:HEOFF) and H2O America (NASDAQ:HTO) are both small-cap utilities companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, earnings, valuation, analyst recommendations, dividends, profitability and risk.

Profitability

This table compares H2O Innovation and H2O America’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
H2O Innovation	-0.68%	5.82%	2.73%
H2O America	13.03%	7.67%	2.27%

Insider & Institutional Ownership

84.3% of H2O America shares are held by institutional investors. 4.9% of H2O Innovation shares are held by company insiders. Comparatively, 0.4% of H2O America shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk & Volatility

H2O Innovation has a beta of 0.47, suggesting that its stock price is 53% less volatile than the S&P 500. Comparatively, H2O America has a beta of 0.53, suggesting that its stock price is 47% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for H2O Innovation and H2O America, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
H2O Innovation	0	0	0	0	0.00
H2O America	0	1	1	0	2.50

H2O America has a consensus price target of $56.50, indicating a potential upside of 13.23%. Given H2O America’s stronger consensus rating and higher probable upside, analysts clearly believe H2O America is more favorable than H2O Innovation.

Earnings and Valuation

This table compares H2O Innovation and H2O America”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
H2O Innovation	$189.12 million	1.48	-$970,000.00	($0.01)	-312.01
H2O America	$748.44 million	2.35	$93.97 million	$3.05	16.36

H2O America has higher revenue and earnings than H2O Innovation. H2O Innovation is trading at a lower price-to-earnings ratio than H2O America, indicating that it is currently the more affordable of the two stocks.

Summary

H2O America beats H2O Innovation on 12 of the 14 factors compared between the two stocks.

About H2O Innovation

H2O Innovation Inc. designs and provides integrated water treatment solutions based on membrane filtration technology. It operates through three segments: Water Technologies and Services, Specialty Products, and Operation and Maintenance Services. The company offers membrane filtration technology for municipal, industrial, energy, and natural resources end-users; and aftersales services, as well as digital solutions to monitor and optimize water treatment plants. Its products include the FiberFlex open-source technologies for water treatment systems; the flexMBR for wastewater treatment systems; SILO system for wastewater and water reuse treatment; and FlexBox, a mobile fleet of water and wastewater treatment systems, such as containerized ultrafiltration or reverse osmosis (RO) systems. The company also offers specialty chemicals, consumables, and specialized products for the water industry, including RO membrane chemicals, such as antiscalants, flocculants, biocides, and cleaning chemicals; corrosion resistant equipment for desalination plants; flexible grooved-end couplings, fiberglass reinforced polyester cartridge filter housings, self-cleaning disc and screen filters, bag filters, cartridges, and strainers; and maple farming equipment. In addition, it operates, maintains, and repairs water and wastewater treatment systems, distribution equipment, and associated assets. The company was incorporated in 1995 and is headquartered in Quebec City, Canada. As of December 8, 2023, H2O Innovation Inc. was taken private.

About H2O America

SJW Group, through its subsidiaries, provides water utility and other related services in the United States. It operates in Water Utility Services and Real Estate Services segments. The company engages in the production, purchase, storage, purification, distribution, wholesale, and retail sale of water and wastewater services; and supplies groundwater from wells, surface water from watershed run-off and diversion, reclaimed water, and imported water purchased from the Santa Clara Valley Water District. It also offers non-tariffed services, including water system operations, maintenance agreements, and antenna site leases; contracted services, sewer operations, and other water related services to water utilities; and a Linebacker protection plan for public drinking water customers in Connecticut and Maine. In addition, the company provides water service to approximately 232,400 connections that serve approximately one million people residing in portions of the cities of San Jose and Cupertino and in the cities of Campbell, Monte Sereno, Saratoga, and the Town of Los Gatos; adjacent unincorporated territories in the County of Santa Clara in the State of California; water service to approximately 141,000 service connections, which serve approximately 461,000 people in 81 municipalities with a service area of approximately 272 square miles in Connecticut and Maine and approximately 3,000 wastewater connections in Southbury, Connecticut; approximately 28,000 service connections that serve approximately 83,000 people in a service area comprising approximately 271 square miles in the region between San Antonio and Austin, Texas; and approximately 950 wastewater connections. Further, it owns undeveloped land in California and Tennessee; commercial and warehouse properties in Tennessee; and commercial properties and parcels of land in Connecticut. The company was formerly known as SJW Corp. and changed its name to SJW Group in November 2016. SJW Group was incorporated in 1985 and is headquartered in San Jose, California.