Current Price
$54.86
Intrinsic Value
$65.74
+16.6% margin of safety
What Is SJW Group's Intrinsic Value?
As of 2025-05-05, the base-case DCF model estimates the intrinsic value of SJW Group (SJW) at $65.74 per share, compared with a market price of $54.86, a margin of safety of +16.6%. The base case assumes 5.3% annual free cash flow growth and a 10.0% discount rate.
Across the sensitivity grid the estimate spans $50.24 to $83.77. Intrinsic value is an estimate built on assumptions, not a fact. A higher discount rate or slower growth pushes the estimate down, while stronger cash flow growth lifts it.
How the DCF works · Recalculate with your own assumptions · What is intrinsic value?
Is SJW Group (SJW) Undervalued?
At $54.86, SJW trades about 16.6% below the base-case intrinsic value estimate. That is a real discount, but it stays short of the 30% margin of safety required before calling a stock undervalued.
COMPETITIVE MOAT
↑Regulated Monopoly Status
SJW Group operates as a regulated utility, granting it exclusive service territories. This legal monopoly significantly limits direct competition within its core water and wastewater operations.
↑High Capital Intensity
The water utility industry requires substantial and ongoing investment in infrastructure. This high barrier to entry deters new players from entering the market and competing with established entities like SJW.
↑Essential Service Demand
Water and wastewater services are non-discretionary necessities for households and businesses. This fundamental demand provides a stable and predictable revenue stream, underpinning the company's financial resilience.
INVESTMENT RISKS
↓Water Scarcity and Drought
Prolonged droughts or water scarcity in its service territories can impact water availability and increase operational costs. This poses a direct threat to service delivery and revenue.
↓Environmental Regulations
Stricter environmental regulations regarding water quality and discharge can necessitate costly upgrades and compliance measures. Failure to comply can result in significant fines and reputational damage.
↓Interest Rate Sensitivity
As a capital-intensive business, SJW relies on debt financing. Rising interest rates increase borrowing costs, impacting profitability and the ability to fund necessary infrastructure projects.
Base case
SJW base case valuation
Intrinsic Value
$65.74
Margin of safety
+16.6%
Expected annual return
+3.7%
Base case assumptions: 5.3% annual growth, 10.0% discount rate, 12x exit multiple, 5 year projection. Data as of 2025-05-05.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the SJW valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for SJW Group respond.
Open DCF Calculator for SJWCompany Overview
Operating across the United States, SJW Group, through its various subsidiaries, delivers essential water and wastewater utility services. Its operations encompass the full spectrum of water management, from sourcing and acquiring water supplies to their storage, purification, and subsequent distribution, including both wholesale and retail provision, alongside wastewater management services. Beyond its core utility offerings, SJW Group provides a range of non-regulated services. These include managing water system operations, undertaking maintenance contracts, and leasing antenna sites. It also offers specialized contracted services and manages sewer operations for other water utilities. Additionally, the company offers a unique "Linebacker protection plan" to its drinking water customers in Connecticut and Maine. The company utilizes a diverse portfolio of water sources. These include groundwater extracted from wells, surface water derived from watershed runoff and diversions, treated reclaimed water, and imported water acquired from the Santa Clara Valley Water District. SJW Group's extensive customer base spans multiple states. In California, the company serves approximately one million individuals through roughly 231,000 active connections. This extensive service area encompasses parts of San Jose and Cupertino, along with the cities of Campbell, Monte Sereno, Saratoga, and the Town of Los Gatos, plus surrounding unincorporated areas within Santa Clara County. Its operations further extend to Connecticut and Maine, where it supplies water to about 456,000 residents via 140,000 connections. This service covers 81 distinct municipalities across an area of approximately 269 square miles. Additionally, in the Texas corridor situated between San Antonio and Austin, SJW Group supports around 70,000 people through approximately 24,000 connections, covering about 266 square miles. Finally, its wastewater services cater to roughly 3,000 connections in Southbury, Connecticut. The company also holds significant real estate assets, including undeveloped land in both California and Tennessee, and manages commercial buildings and warehouse facilities within Tennessee. Established in 1985, the organization initially operated under the name SJW Corp. before rebranding as SJW Group in November 2016. Its corporate headquarters are located in San Jose, California.
Financial Metrics — SJW Stock Valuation Data
Revenue/Share (TTM)
$20.76
FCF/Share (TTM)
$4.02
ROIC (TTM)
n/m
ROE (TTM)
6.3%
P/FCF
11.7x
EV/EBITDA
6.9x
FCF Yield
8.56%
Debt/Equity
0.00x
Based on trailing twelve-month data, SJW shows a free cash flow per share of $4.02 and a ROIC of n/m, key inputs for stock valuation using the DCF method. The P/FCF ratio of 11.7x and FCF yield of 8.56% are important context metrics when evaluating SJW's stock valuation relative to peers.
Frequently Asked Questions
What is the intrinsic value of SJW?
SJW Group currently generates $4.02 in free cash flow per share. At the current price of $54.86, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is SJW undervalued?
SJW trades at a P/FCF ratio of 11.7x with a free cash flow yield of 8.56%. A low P/FCF means investors are paying less per dollar of free cash flow; whether that is cheap depends on the company's growth, cyclicality, and capital intensity. However, whether SJW is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value SJW stock using DCF?
To perform a DCF valuation on SJW Group: (1) Start with the trailing free cash flow per share ($4.02) as the base, (2) project future FCF growth over 5-10 years based on Regulated Water industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting SJW's risk profile — with a debt-to-equity of 0.00x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to SJW?
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For SJW Group, this means projecting how much free cash flow the company will produce over the next 5-10 years, shaped by Regulated Water trends, then discounting those amounts to today's dollars.
How does WACC affect SJW stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For SJW, with a debt-to-equity ratio of 0.00x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 6.9x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See SJW PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Utilities valuationsDCF and P/E value SJW with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2025-05-05. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.