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HTO, H2O America

Water Utilities capital-intensive Regulated utility

H2O America is the holding company for SJWTX, Inc., doing business as The Texas Water Company, Texas Water Operation Services, LLC and Texas Water Resources, LLC.

SJWC is a public utility in the business of providing water service in the metropolitan San Jose, California area.

H2O America NE LLC is a special purpose entity established to hold H2O America's investment in Connecticut Water Service, Inc.

Latest annual: FY2025 10-K

HTO · H2O America

The business

What it sells, where the money comes from, the kind of company it is.

Revenue · FY2025

$806M

+9.4% YoY · 8% 5-yr CAGR

Vital signs · TTM, with 5-yr average

Revenue $820M 5-yr avg $673M

Operating margin 21.8% 5-yr avg 21.9%

ROIC 5% 5-yr avg 5%

The business in brief

read the 10-K →

What this business is and what moves its needle, from its own SEC filings.

Situation: Regulated utility. Returns are set by regulation on an approved rate base; the capital spending regulators approve becomes the growth, recovered through allowed rates.
What moves the needle: Operating margin has run about 22% through the cycle, a solid margin the cost base and competition set as much as the price does. Read this kind of business on rate base and the allowed return. On its own account, the filing leans hardest on supplier & input dependence, set against the numbers in what the filing emphasizes, below.
Is it a good business?: Return on capital has rarely cleared the cost of capital (median 5%, above 15% in 0 of 10 years). This is price-taker territory, where the balance sheet and the cycle matter more than any multiple; the rest is in the 10-K.

Every line is arithmetic on the company's filings, shown in full in the sections below.

The record

Ten years of arithmetic, read across the cycle.

The record, 2016–2025

realized figures from each filing · older years to the left

2016’16	2017’17	2018’18	2019’19	2020’20	2021’21	2022’22	2023’23	2024’24	2025’25	TTMTTMMar 2026
											Income statement
$328M	$382M	$389M	$448M	$549M	$560M	$587M	$678M	$736M	$806M	$820M	RevenueRevenue
13%	13%	13%	15%	15%	16%	16%	15%	14%	16%	16%	SG&A / revenueSG&A/rev
$97M	$102M	$73M	$57M	$118M	$111M	$131M	$149M	$171M	$178M	$179M	Operating incomeOp. inc.
29.7%	26.7%	18.9%	12.8%	21.4%	19.9%	22.3%	22.0%	23.2%	22.0%	21.8%	Operating marginOp. mgn
$53M	$59M	$39M	$23M	$62M	$60M	$74M	$85M	$94M	$103M	$105M	Net incomeNet inc.
39%	37%	21%	27%	12%	12%	10%	7%	9%	11%	10%	Effective tax rateTax rate
											Cash flow & returns
$115M	$101M	$91M	$130M	$104M	$130M	$166M	$191M	$196M	$245M	$245M	Operating cash flowOp. cash
$46M	$51M	$57M	$68M	$92M	$96M	$106M	$108M	$115M	$120M	$125M	DepreciationDeprec.
$14M	($11M)	($6M)	$35M	($53M)	($31M)	($19M)	($7M)	($19M)	$15M	$9M	Working capital & otherWC & other
—	—	—	$835M	$0	$24M	$433K	$8M	$0	$0	$0	AcquisitionsAcquis.
$17M	$21M	$23M	$34M	$37M	$40M	$44M	$48M	$52M	$59M	$60M	Dividends paidDiv. paid
7%	7%	6%	2%	5%	4%	5%	5%	5%	5%	5%	ROICROIC
13%	13%	4%	3%	7%	6%	7%	7%	7%	7%	6%	Return on equityROE
9%	8%	2%	−1%	3%	2%	3%	3%	3%	3%	2%	Retained to equityRetained/eq
											Balance sheet
$6M	$8M	$421M	$13M	$5M	$11M	$12M	$10M	$11M	$21M	$153M	Cash & investmentsCash+inv
$16M	$17M	$19M	$36M	$47M	$54M	$59M	$68M	$69M	$62M	$62M	ReceivablesReceiv.
$19M	$23M	$25M	$35M	$34M	$30M	$30M	$46M	$56M	$75M	$63M	Accounts payablePayables
($2M)	($6M)	($6M)	$1M	$13M	$23M	$30M	$22M	$12M	($13M)	($811K)	Operating working capitalOper. WC
$100M	$67M	$503M	$122M	$127M	$134M	$158M	$198M	$191M	$191M	$323M	Current assetsCur. assets
$64M	$85M	$164M	$235M	$351M	$203M	$268M	$343M	$261M	$273M	$160M	Current liabilitiesCur. liab.
1.6×	0.8×	3.1×	0.5×	0.4×	0.7×	0.6×	0.6×	0.7×	0.7×	2.0×	Current ratioCurr. ratio
—	—	$2M	$628M	$628M	$640M	$640M	$640M	$640M	$640M	$640M	GoodwillGoodwill
$1.4B	$2.0B	$2.0B	$3.1B	$3.3B	$3.5B	$3.8B	$4.3B	$4.7B	$5.1B	$5.4B	Total assetsAssets
$433M	$431M	$431M	$1.3B	$1.4B	$1.5B	$1.5B	$1.6B	$1.7B	$1.9B	$1.9B	Total debtDebt
$427M	$423M	$11M	$1.3B	$1.4B	$1.5B	$1.5B	$1.6B	$1.7B	$1.9B	$1.7B	Net debt / (cash)Net debt
—	4.4×	3.0×	1.8×	2.2×	2.0×	2.3×	2.3×	—	—	2.5×	Interest coverageInt. cov.
$422M	$463M	$889M	$890M	$917M	$1.0B	$1.1B	$1.2B	$1.4B	$1.5B	$1.8B	Shareholders’ equityEquity
0.5%	0.7%	0.5%	0.8%	0.6%	0.8%	0.8%	0.7%	0.8%	0.8%	0.8%	Stock comp / revenueSBC/rev
											Per share
20.6M	20.7M	21.3M	28.6M	28.7M	29.7M	30.4M	31.7M	32.8M	35.1M	38.5M	Shares out (diluted)Shares
$15.94	$18.46	$18.25	$15.68	$19.14	$18.82	$19.29	$21.42	$22.46	$22.95	$21.27	Revenue / shareRev/sh
$2.57	$2.86	$1.82	$0.82	$2.14	$2.03	$2.43	$2.68	$2.87	$2.92	$2.72	EPS (diluted)EPS
$0.80	$1.03	$1.08	$1.20	$1.27	$1.35	$1.43	$1.51	$1.59	$1.67	$1.57	Dividends / shareDiv/sh
$20.48	$22.39	$41.69	$31.16	$31.96	$34.79	$36.51	$38.95	$41.70	$43.89	$47.58	Book value / shareBVPS

Per-share growththe realized rate an owner's share compounded

	9-yr	5-yr
Revenue / share	+4.1%/yr	+3.7%/yr
EPS	+1.5%/yr	+6.4%/yr
Dividends / share	+8.5%/yr	+5.6%/yr
Book value / share	+8.8%/yr	+6.5%/yr

The record, charted

FY2016–2025

Each measure over its full record; the current point and the worst year marked.

Share count

35Mpeak FY2025

ROIC

5%low FY2019

Where the cash went

ReinvestBuybacksDividendsAcquisitionsRetainedBeyond op. cash

Each year's outlays against its operating cash: the mix, and how it drifts. The hatched cap is spending beyond that year's operating cash — financed from the balance sheet or borrowing, not operations.

FY2016FY2025

III

Quality & stewardship

Returns, the balance sheet, capital allocation, and pay.

Owner’s Scorecard

FY2025 10-K · source on SEC EDGAR →

Will it survive?

Can it pay its interest? 2.7×

Adequate

Operating income $178M ÷ interest expense $66M

What this means
Comfortable in a normal year, but below the margin of safety Graham looked for. Worth checking how stable the coverage has been across a full cycle.
How heavy is the debt, net of cash? $1.9B · 10.5× operating profit

Heavy net debt

Cash $21M − debt $1.9B

What this means
Netting $21M of cash and short-term investments against $1.9B of debt leaves $1.9B owed, about 10.5× a year's operating profit (10.6× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.
How long is cash tied up? —

Not enough data

What this means
The filing data didn't include the inputs for this check.

Is it a good business?

Return on invested capital 5%

Below average through the cycle

10-yr median, range 2%–7%; 5% latest = NOPAT $158M ÷ invested capital $3.4B

Industry peers: median 6%

What this means
The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 10 years (it ran 5% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.
Owner-earnings margin —

Not enough data

Industry peers: median 16%

What this means
The filing data didn't include the inputs for this check.
Are earnings backed by cash? 2.39×

Cash-backed

Cash from ops $245M ÷ net income $103M

What this means
How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

Where do the earnings go? —

Not enough data

What this means
The filing data didn't include the inputs for this check.
Investing or harvesting? —

Not enough data

What this means
The filing data didn't include the inputs for this check.

Graham’s defensive tests · 3 of 6 met

Graham’s numerical criteria for the defensive investor (The Intelligent Investor, ch. 14), run on the filings. A floor of safety, not a buy signal; many fine modern businesses fail his strictest liquidity rules by design.

Adequate size Miss

Revenue ≥ $2B · $806M

What this means
Big enough to weather a storm. Graham's 1972 floor was ~$100M of sales (≈ $700M today); we use a $2B revenue line as a conservative modern stand-in.
Strong liquidity Miss

Current ratio ≥ 2× · 0.70×

What this means
Current assets at least twice current liabilities, near-term bills covered without touching the business. Strict by design: many cash-rich modern firms run leaner and miss it, holding their cushion in longer-dated securities.
Conservative debt Miss

Debt ≤ working capital · $1.9B vs ($83M) WC

What this means
Graham's rule that borrowings not exceed net current assets. Capital-heavy and buyback-heavy firms routinely fail it, read it next to interest coverage, not alone.
Earnings stability Pass

A profit every year (10-yr record) · no losses

What this means
Graham wanted earnings in each of the past ten years, the stability a defensive owner leans on.
Dividend record Pass

Uninterrupted dividends · paid every year (10)

What this means
An unbroken dividend was Graham's mark of durability. He wanted twenty years; the filings show about ten, and a single suspension breaks the streak. Non-payers, many fine modern compounders, fall outside his defensive net by design.
Earnings growth Pass

Earnings +33% over the record · +87%

What this means
At least a third more earnings than a decade ago, averaging three years at each end. Net income (not per-share), so stock splits don't distort it, buybacks and dilution show up in the share-count line instead.
Moderate price —

P/E ≤ 15 and P/E × P/B ≤ 22.5 · decided by the price

What this means
Graham's valuation gate, the wall he kept between a sound business and a sound investment. Three-year average earnings are $2.24/share (latest year $2.45), the averaged base the calculator's gate runs on, and book value is $36.83/share. Enter a price in “What the price implies” just below for the P/E, P/B, and whether it clears. But this is the rule Buffett outgrew: there's no hard P/E law, and a wonderful business can deserve a far richer multiple if the thesis holds, treat it as the bargain-hunter's floor, not a verdict on the price.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

Profitable years 10 of 10

What this means
Never lost money over the record, the earnings stability Graham insisted on.
Return on capital ≥ 15% 0 of 10 yrs

What this means
A moat shows up as a high return on invested capital that holds year after year, not one good vintage.
Operating margin 25% → 22% (3-yr avg ends)

In the filing’s words The filing attributes gains to higher prices, but the margin in the record has not followed — the claim outruns the result here.

What this means
Through the cycle the operating margin slipped — about 25% early to 22% lately, median 22% — competition or costs are biting in.
Reinvestment, incremental ROIC 4%

What this means
Reinvested capital came back at only a modest incremental return — near the cost of capital, where extra growth adds little per dollar. The record shows whether it is a soft stretch or a thinning moat.
Worst year 2019 · 12.8% op. margin

What this means
Stayed profitable even in its hardest year, the resilience that survives recessions.
Share count +6.1%/yr

What this means
The share count is rising, dilution works against you on a per-share basis.
Dividend record rising

What this means
Paid and raised the dividend across the record, the continuity Graham prized.

Does AI threaten the moat?

Low contestability

The moat is physical, regulated or balance-sheet-funded, the kind AI cuts costs within but does not contest.

In its own filing Raised, but not as a competitor

The filing raises AI among its risks, but in other terms (security, regulation, energy or the like), not as a competitor to its product.

AI is unlikely to contest a moat that is physical, regulated or balance-sheet-funded; here it reads more as a cost tool than a threat.

Read from the filing's own risk factors, paired with the industry's structure under its SIC code; the durability is read above, the price below.

All figures as filed; the source filing is linked above.

Current Position

as of the latest quarter, Mar 31, 2026

Can the business pay what it owes this year, off the freshest balance sheet: the quality of the assets, the debt actually coming due, and what a low ratio means here.

Current assets$323M

Cash & short-term investments$153M
Receivables$62M
Other current assets$108M

Current liabilities$160M

Debt due within a year$9M
Accounts payable$63M
Other current liabilities$89M

Current ratio2.02×all current assets ÷ what's due · Graham looked for 2×

Quick ratio2.02×stricter: inventory excluded

Cash ratio0.96×strictest: cash alone against what's due

Working capital$163Mthe cushion left after near-term bills

Debt due this year vs. cash$9M due · $153M cash covered by cash on hand, no refinancing forced · both figures from the Mar 31, 2026 balance sheet

Revenue, latest quarter vs. a year ago+9.4%the freshest read on whether the business is still growing

Current ratio, recent quarters0.5× → 2.0×

Deeper floors

Tangible book value$1.2Bequity stripped of goodwill & intangibles

Debt incl. operating leases$1.9Bno operating-lease liability tagged this quarter, so debt alone

Deferred revenue$211Mcustomer cash collected before delivery; operating float

From the company's latest filing.

Acquisitions & goodwill

from the balance sheet & the 10-year cash-flow record

Goodwill grows only when a company acquires and falls only when it concedes it overpaid. The size of that bet, the cash put into buying rather than building, and how much has already been written off.

Goodwill & intangibles$681M13% of all assets; the premium carried on the balance sheet for businesses acquired

Against book equity42%goodwill is this share of book equity; the rest is the company’s own retained and paid-in capital

Cash spent acquiring$867Mover 10 years buying other businesses

None written down over the record; the goodwill is still carried at full cost. That is the deals holding their value on the books so far; whether they keep doing so is the test an owner watches, since the write-down, when it comes, is the admission the price was too high.

Goodwill, acquired intangibles and equity from the latest balance sheet; acquisition spend and write-downs summed across the 10-year record, from the company's own filings.

Management, ownership & pay

read the proxy →

From the proxy: how much of the business the people running it own, and how they are paid, beside what the business earned for its owners in the same years.

Fiscal year	Pay, as filed	“Actually paid”	Net income
2021	$3.3M	$2.8M	$60M
2022	$3.2M	$4.6M	$74M
2023	$4.2M	$3.0M	$85M
2024	$4.0M	$1.8M	$94M
2025	$3.1M	$2.0M	$103M
2025	$2.9M	$1.9M	$103M

Both pay figures are the company’s own, from the pay-versus-performance table its proxy statement files. “As filed” is the Summary Compensation Table total: salary, bonus, and equity awards at their value on the day of grant. “Actually paid” is the SEC’s prescribed recalculation, which re-marks those equity awards to what they became as they vested; it can swing far above or below the filed figure in either direction, and negative years occur. Net income is the whole business's, as filed, for the same fiscal years.

Insider ownership<1%
The stake all directors and executive officers hold together, per the 2026 proxy: skin in the game, the first thing Munger reads.
Stock-based compensation$6M
The slice of the business handed to employees in shares this year, 1% of revenue, equal to 4% of operating profit. Buffett's oldest accounting fight: this is compensation, compensation is an expense, real whether or not the headline earnings admit it. One trap: the cash-flow statement adds SBC back, so the operating cash, and the owner earnings drawn from it, are flattered by exactly this amount; counted as the cost it is, what an owner keeps is lower.

Inverting the record

Invert: instead of why H2O America is a good business, the question is what would make owning it a mistake, and whether those marks are in the record. Disconfirming tests across 2016–2025.

2 of the 4 tests turned up something to look into; the other 2 came back clean.

Look hereIs it less profitable than it was?22.4% vs 25.1%
The operating margin averaged 25.1% early in the record and 22.4% across the last three years, and the latest year has not recovered. Ask the filing whether that is a structural drift or a cyclical trough — price, mix, cost, or a competitor — and whether it is permanent.
Look hereDid receivables and inventory outpace sales?5% → 8% of sales
Receivables and inventory grew from $16M to $62M while revenue grew 150%: working capital is climbing faster than sales (5% of revenue then, 8% now). That can mean customers paying slower, stock building up, or revenue pulled forward. The filing's cash-flow and receivables notes say which.

And these came back clean

Did reported profit become cash?
Are "one-time" charges a yearly habit?

Each test is read from the filings and is noisy alone; a flag can mark a cyclical trough or a year of heavy investment as easily as a problem. The filing says which.

Peers, Water Utilities

The same industry, side by side on owner economics. Each figure is a through-cycle median, so a peak or trough year can’t distort it; the group median at the foot is the line to read each against.

Company	Revenue	Gross margin	Op. margin	ROIC	Owner earn. margin
WTRGEssential Utilities	$2.5B	—	36.8%	6%	30%
ORAOrmat Technologies Inc.	$990M	37%	25.6%	4%	11%
CWTCalifornia Water Service	$964M	—	16.5%	5%	15%
CPKChesapeake Utilities Corporation	$930M	—	22.3%	7%	16%
HTOH2O America	$806M	—	22.0%	5%	—
MGEEMGE Energy	$744M	—	20.8%	7%	-3%
AWRAmerican States Water	$658M	89%	28.3%	10%	17%
MSEXMiddlesex Water	$195M	—	27.3%	6%	21%
Group median	—	—	24.0%	6%	—

The price

What a price has to assume.

What the price implies

reverse-DCF

H2O America is profitable, but its owner-earnings base could not be formed from this filing’s tagged data (operating cash flow or capital spending is missing), so the owner-earnings reverse-DCF has no base to grow. We read the price from both ends instead: type a price to see the profitability it demands, then set the mature margin you would believe and weigh the two against each other. Nothing leaves your browser unless you enter it in your notebook.

Today’s price $

The assumptions Required return 9% Years to get there 10 Revenue growth 0%

Revenue, delivered9%/yr’20→’25

Mature owner-earnings margin 15%

Enter a price to run it.

Owner earnings it must reach—

Margin the price demands—

Owner-earnings margin today—

Two reads of one future. From your price: the owner earnings the company must reach, valued at a mature multiple and discounted back at your rate, expressed as the margin it implies on revenue grown at your rate. From your belief: the mature margin you would credit, set on the dial above. When the margin the price demands runs above the one you would believe, you are paying for a future taken on faith. For a deep cyclical at a trough, normalized through-cycle earnings are the better lens; this mode is for the genuinely unprofitable, and for the profitable business whose capital spending currently outruns its cash.

Weigh HTO against another business →

The owners of HTO: the meeting and the votes →

Cite: Owner Scorecard, "H2O America (HTO), the owner's record," https://ownerscorecard.com/c/HTO, data as of 2026-07-09.

Manual order: ← HTLD its page in the Manual HTZ →

Industry order: ← CWT the Water Utilities chapter MSEX →