10 Best Water Recycling Stocks to Buy

6. Tetra Tech, Inc. (NASDAQ:TTEK)

Number of Hedge Fund Holders: 36

Tetra Tech, Inc. (NASDAQ:TTEK) provides engineering and consulting services for water reuse, desalination, wastewater treatment, and contaminant removal. Its relationships with more than 500 US municipal clients position it to capture spending on treatment upgrades and water-system modernization.

The opportunity also extends overseas. In fiscal Q3 2026, international net revenue increased 12%, partly supported by water programs in the UK, Ireland, and the Netherlands. Across those markets, Tetra Tech, Inc. held more than £2 billion in contract capacity. This provides room for additional assignments, although contract capacity does not guarantee revenue.

The financial appeal is that specialized design work can improve profitability as projects progress. Operating cash flow reached $467 million over the first nine months, up 31%, while net debt stood at 0.88 times EBITDA. Strong cash generation gives the company flexibility to invest in technical capabilities and acquisitions.

Its broader investment case also attracted Cooke & Bieler, as discussed in our September coverage of what makes Tetra Tech a bullish bet.

On October 15, KeyBanc maintained Overweight while lowering its target to $41 from $43, viewing the engineering sector’s valuation decline as an attractive entry point. Tetra Tech, Inc.’s expanding backlog, up 5% sequentially to nearly $4.5 billion, supports that optimism. However, municipal funding decisions and project timing will determine how quickly the water opportunity translates into earnings.

5. American Water Works Company, Inc. (NYSE:AWK)

Number of Hedge Fund Holders: 39

American Water Works Company, Inc. (NYSE:AWK) operates regulated drinking-water and wastewater systems. Its treatment exposure includes upgrading plants, addressing PFAS contamination, and improving systems acquired from smaller operators.

The growth case follows that investment cycle. American Water Works Company, Inc. deployed $2.8 billion into infrastructure and acquisitions during the first nine months of 2026, adding approximately 81,000 customer connections. Approved investments can expand the asset base on which regulators allow it to earn returns.

Those returns are already supporting results. New Jersey approved a $68 million annualized water and wastewater revenue increase, with new rates effective September 15. Third-quarter adjusted EPS rose to $2.00 from $1.89, and management issued standalone 2027 adjusted EPS guidance of $6.53–$6.63, representing roughly 8% growth at the midpoint.

The proposed Essential Utilities merger offers further scale, with management expecting completion by the end of Q1 2027. However, the standalone outlook already provides an earnings-growth case before the transaction closes.

Funding costs and the price investors pay remain important. American Water Works Company, Inc. expects $4.1 billion of investment, including acquisitions, in 2027, alongside $2 billion–$3 billion in long-term debt financing. Our October analysis explores whether American Water’s protected market position justifies its valuation and financing burden.

UBS reinforced that valuation concern on November 5, downgrading the stock to Neutral after a 21% recovery from its late-May low, even as it raised its target to $162.