YORW

York Water ($YORW): Management's 51 Consecutive Buys vs 15% Stock Decline - Will March 2026 Rate Decision Be the Answer?

11/14/2025 14:19

York Water Company ($YORW), a 200-year-old Pennsylvania water utility serving approximately 4.6 million in market capitalization, is sending intriguing investment signals in the current market. The company provides essential water and wastewater services to 57 municipalities across four counties in south-central Pennsylvania, serving about 74,000 water customers and 7,000+ wastewater customers. The most compelling aspect is management's consistent buying behavior. From June 2024 to November 2025, all 51 insider transactions were purchases, with CEO Joseph Hand regularly investing $9,750 in systematic patterns. Other key executives including CFO Matthew Poff and CAO Alexandra Chiaruttini also made consistent purchases of $130 and $1,300 respectively. While these transactions were part of dividend reinvestment plans, they demonstrate strong management confidence in the company's future value. However, the stock price has diverged from management's confidence. Starting at $36 in early June 2024, shares peaked at $40 in mid-July before declining consistently to current levels around $30, representing approximately 15% decline despite ongoing insider buying. The key to this divergence lies in the rate increase application filed in May 2025. The company requested 28.9% water rate and 44.5% wastewater rate increases, with regulatory decisions expected by March 1, 2026. If approved, this would generate an additional $24.2 million in annual revenue, representing 31% of current annual revenue of $76.88 million. Financially, York Water exhibits typical utility characteristics. Q3 2025 revenue increased 3.3% year-over-year to $20.36 million, with net income growing 5.8% to $6.2 million. The company maintains healthy profit margins of 26% and operating margins of 39%. However, concerns arise from a high debt-to-equity ratio of 95.72% and negative levered free cash flow of $31.92 million, resulting from substantial infrastructure investments totaling $37.1 million in the first nine months of 2025, with an additional $10 million planned by year-end. From an investment perspective, key metrics include a P/E ratio of 23.1x, in line with utility sector averages, and analyst price targets averaging $41, suggesting 28% upside potential. The 2.7% dividend yield and low beta of 0.75 enhance its appeal as a defensive investment. Investors should monitor specific criteria for future investment decisions. In a positive scenario, rate increase approval above 80% of requested levels would provide immediate revenue enhancement and likely trigger stock revaluation. Revenue increases exceeding $19 million annually would significantly strengthen the current valuation thesis. Conversely, warning signs include rate increase approvals below 50% of requested levels, debt-to-equity ratios exceeding 100%, or quarterly net income falling below $5 million. Federal rate increases or broader utility sector regulatory tightening also pose risks. The most probable scenario involves rate increase approvals at 60-70% of requested levels, potentially generating $15 million in additional annual revenue and supporting stock recovery to $35-37 levels. Management's consistent buying behavior suggests confidence in this outcome. Overall, York Water offers an attractive opportunity for conservative investors seeking stable cash flows and dividend income, particularly given current undervaluation relative to management expectations and the clear catalyst of March 2026 rate decisions.