Water recycling stocks offer exposure to companies that treat used water so it can serve another purpose, from industrial cooling and manufacturing to irrigation and, with appropriate treatment, drinking-water supply. For investors, the opportunity spans treatment equipment, filtration, chemicals, engineering, and services that help customers reduce freshwater consumption.
The potential scale is substantial. According to the World Bank’s Scaling Water Reuse report published last year, potable and industrial reuse capacity could expand eightfold by 2040 to 430 million cubic meters per day, supported by targeted investment and enabling regulations. The report identifies up to $340 billion in potential investment by that date. These are conditional estimates, but they demonstrate how water reuse could become a larger infrastructure market.
The economics depend on location and application. The World Bank finds that reuse projects have the strongest business case where wastewater is available close to the customer, particularly in urban centers and industrial parks. For businesses supplying these projects, the opportunity therefore depends on delivering reliable water at a cost that makes sense for the end user.
Demand Extends From Municipal Infrastructure to Manufacturing
Water reuse is gaining attention as communities balance industrial expansion with pressure on existing supplies. The US Environmental Protection Agency’s National Water Reuse Action Plan identifies growing demand from data centers and manufacturing, alongside changing precipitation patterns, as challenges to long-term water availability. The agency released its updated Water Reuse Action Plan 2.0 on April 16, 2026, expanding its focus on industrial and technology applications.
This demand creates opportunities across several parts of the water-treatment process. These services are increasingly relevant to manufacturers seeking greater operational efficiency and lower freshwater consumption.
Water treatment is one part of the infrastructure needed to support industrial and technological expansion. Our 10 Best Stocks to Buy for Next-Gen Data Centers explore the wider buildout, including cooling and power systems. For water-treatment suppliers, the opportunity lies in helping these facilities meet operating requirements while managing freshwater consumption.
What Makes a Strong Water Recycling Stock?
Investing in water recycling requires looking beyond the importance of the resource itself. Companies must convert customer demand into profitable orders, successful project execution, and recurring revenue. Valuation also matters: a favorable industry outlook can already be reflected in the share price.
The same investment discipline applies across the businesses covered in our 13 Best Infrastructure Stocks to Buy Right Now. For water-related companies, investors should examine whether contracts and repeat business can generate enough cash to fund expansion and reward shareholders, rather than relying on demand forecasts alone.
The following 10 stocks represent different parts of the water recycling ecosystem. They include diversified companies with meaningful treatment, filtration, reuse, or engineering operations, alongside businesses serving broader industrial markets. Their investment cases depend on both their water-related opportunities and the performance of their other operations.
Our Methodology
For this article, we reviewed financial media coverage to identify companies with meaningful water recycling operations, including wastewater treatment, filtration, and water reuse solutions. Our list includes diversified businesses with exposure to engineering, industrial services, and other markets, rather than exclusively pure-play water recycling companies. Finally, we ranked the selected stocks in ascending order by the number of hedge funds holding stakes in each company, using Insider Monkey’s hedge fund database as of Q2 2026.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Insider Monkey’s quarterly newsletter strategy selects 14 small-cap and large-cap stocks every quarter and has returned 612% since May 2014, beating its benchmark by 375 percentage points (see more details here).
10. Stantec Inc. (NYSE:STN)
Number of Hedge Fund Holders: 24
Stantec Inc. (NYSE:STN) designs wastewater treatment plants, water reclamation facilities, and related infrastructure. Its water recycling exposure comes through engineering work needed to expand treatment capacity and modernize aging systems.
Water delivered nearly 12% organic growth in Q2 2026. Within Stantec Inc.’s Global region, water growth exceeded 20%, supported by long-term agreements and public investment across the UK, Australia, and New Zealand. Canadian wastewater and biosolids projects also generated double-digit water growth.
These agreements provide work beyond individual construction projects. Our coverage of Stantec’s five-year Melbourne water program shows how population growth is translating into treatment and sewer infrastructure assignments.
Water backlog grew more than 10% organically during the quarter. Management explained that large UK water frameworks enter backlog only when specific work is assigned. Further assignments could therefore support revenue beyond the orders currently reported.
Recent wins include preliminary design and evaluation work at Colorado’s Drake Water Reclamation Facility, a 23-million-gallon-per-day wastewater treatment plant. The project aims to improve debris removal and treatment reliability.
Delivering the growing workload remains essential. Stantec Inc. is adding staff, while slower project starts held overall US organic growth flat during the quarter. Strong water demand supports the outlook, but assignment timing and staffing will determine how quickly orders become revenue. Net debt of 1.3 times adjusted EBITDA provides financial flexibility as that work progresses.
9. Select Water Solutions, Inc. (NYSE:WTTR)
Number of Hedge Fund Holders: 33
Select Water Solutions, Inc. (NYSE:WTTR) collects, treats, and recycles water generated by oil and gas production. Its expanding infrastructure network gives producers reliable outlets for wastewater while building a larger base of contracted revenue.
In Q3 2026, produced-water volumes handled reached 1.7 million barrels daily, up 14% sequentially and more than 30% year-over-year. Water Infrastructure revenue reached $110 million, with a 57% gross margin before depreciation and amortization. That follows the near-doubling of quarterly profit that sent Select shares to a record high in August.
The recently completed Pilot Water acquisition adds disposal capacity alongside Select’s recycling facilities. Connecting these networks should help the company recycle water where customers need it and redirect excess volumes to disposal sites. Select Water Solutions, Inc.’s management expects the broader offering to attract additional contracts.
Longer agreements strengthen revenue visibility. An August expansion with an investment-grade customer added more than 250,000 dedicated acres and extended an existing contract by 12 years at a higher rate. JPMorgan’s August initiation of Select Water Solutions, Inc. at Overweight, with a $24 target, supported this thesis, highlighting improving EBITDA and the growing contracted revenue base.
Investment remains a near-term burden. Third-quarter operating cash flow of $84 million fell short of $88 million in net capital spending. Select Water Solutions, Inc.’s quarterly interest expense is expected to reach $15 million–$17 million following acquisition financing, increasing the importance of integrating Pilot and translating growth into cash.
8. DuPont de Nemours, Inc. (NYSE:DD)
Number of Hedge Fund Holders: 35
DuPont de Nemours, Inc. (NYSE:DD) supplies filtration and purification technologies used in wastewater treatment, desalination, and industrial water processing. Demand across these applications gives its water business several avenues for growth.
In Q3 2026, organic water sales increased by low single digits as industrial demand and semiconductor applications offset some Middle Eastern disruption. Excluding that region, growth reached mid-single digits. Management reported roughly 20% growth in semiconductor-related water applications, supported by AI infrastructure investment. Wastewater treatment and specialty filtration also performed well.
DuPont de Nemours, Inc. secured a major containerized desalination project in Europe, the Middle East, and Africa, where its ultrafiltration modules increase drinking-water output within limited space. Such projects offer further growth, although delivery schedules remain uncertain.
Profitability is also improving. Healthcare & Water Technologies increased operating EBITDA by 7% against 4% sales growth. RBC Capital supported this progress on November 5, raising its target to $173 from $160 and maintaining Outperform, citing organic growth and productivity. Our earlier coverage examines the Q1 earnings beat and analyst optimism behind DuPont’s rally.
The remaining hurdle is converting demand into revenue. DuPont de Nemours, Inc. deferred approximately $15 million of Middle Eastern water sales into 2027 despite having the orders in hand. Completing those projects would strengthen growth, but continued disruption could postpone the contribution.
7. TETRA Technologies, Inc. (NYSE:TTI)
Number of Hedge Fund Holders: 35
TETRA Technologies, Inc. (NYSE:TTI) provides water management services to oil and gas producers and is developing desalination technology that could turn produced water into a usable supply for industrial customers.
Its existing business is improving ahead of that opportunity. In Q3 2026, Water & Flowback Services revenue increased 21% year-over-year to $76.1 million, while adjusted EBITDA rose 69% to $12.7 million. International expansion and adoption of its SandStorm sand-removal technology helped lift the segment’s margin by 480 basis points to 16.7%.
Oasis, its desalination platform, could expand the customer base further. Management identified seven prospective projects, including four connected to data centers and their power requirements. Some could initially treat brackish water before switching to produced water, giving customers a potential supply while the reuse market develops. Earlier earnings coverage details the pilot results behind TETRA’s push to turn oilfield wastewater into a new water source.
Commercial timing remains uncertain. Customers must obtain permits, and management has withheld near-term Oasis revenue targets until approvals and contracts advance. Stifel’s September target reduction reflected this limited desalination progress, alongside uncertainty elsewhere in TETRA Technologies, Inc.’s business.
Clear Street upgraded TETRA Technologies, Inc. to Buy with an $11 target on October 6, but its valuation incorporated expected 2028 bromine earnings. That makes execution across several growth projects important. For the water thesis specifically, permits and signed contracts are the next meaningful milestones.
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.
4. Xylem Inc. (NYSE:XYL)
Number of Hedge Fund Holders: 41
Xylem Inc. (NYSE:XYL) supplies equipment and services that help utilities and industrial customers transport, treat, and reuse water. Its investment case depends on converting a growing order book into revenue while improving profitability.
That conversion slowed in Q3 2026. Organic revenue was roughly flat as utility customers delayed purchases and large treatment projects progressed more slowly than expected. However, orders increased 10% organically, and backlog rose 13% year-over-year to $5.5 billion. Water Solutions and Services orders grew 6% organically, indicating continued customer commitments despite slower execution.
Industrial treatment offers another source of growth. Xylem Inc. secured an ultrapure-water technology contract for a US semiconductor facility and expanded its work with Amazon into data-center treatment projects. These wins could broaden demand beyond municipal spending.
Operational improvements are also helping. Xylem Inc.’s quarterly adjusted EBITDA margin increased 70 basis points to 23.9%, despite the revenue shortfall. Planned divestitures would remove businesses representing approximately 9% of revenue but less than 5% of EBITDA, potentially improving the remaining portfolio’s profitability.
The market nevertheless punished the weaker outlook, with Xylem’s 14.21% post-earnings decline placing it among October 27’s biggest losers.
Goldman Sachs maintained Buy on October 28, citing strong orders and backlog, while lowering its target to $138. The timing matters, however. Some major metering deployments are scheduled for late 2027 and 2028, leaving near-term growth dependent on faster project execution and a recovery in smaller utility purchases.
3. Pentair plc (NYSE:PNR)
Number of Hedge Fund Holders: 43
Pentair plc (NYSE:PNR) provides filtration, water-treatment, and pumping systems for residential, commercial, and industrial customers. Its commercial water business is providing growth while housing weakness and pool inventory adjustments weigh on the wider company.
In Q3 2026, Water Solutions sales increased 1% to $422 million. Commercial sales grew 4%, offsetting weaker residential demand. Management sees further opportunities with large accounts and convenience stores, where expanding customer relationships could support growth despite the slow housing market.
The distinction matters because companywide core sales declined 5%, largely reflecting an 18% drop in Pool. Flow and Water Solutions still increased sales and segment income, suggesting the operating performance outside Pool remains healthier than the consolidated revenue decline implies.
The Taco acquisition adds water-circulation and hydronic flow-control capabilities, expanding Pentair plc (NYSE:PNR)’s exposure to hospitals, schools, commercial buildings, and data centers. Management expects Taco’s EBITDA to exceed $105 million in 2027, estimating its full-year EBITDA at $90 million in 2026 and more than $105 million in 2027.
Goldman Sachs supported this improving outlook on October 28, raising its target on Pentair plc (NYSE:PNR) to $66 while retaining Neutral. It highlighted completed pool destocking and Taco’s stronger performance.
The valuation case still requires an earnings recovery. Our October coverage examines whether Pentair’s lower earnings multiple and dividend support adequately compensate for that uncertainty.
With residential demand constrained by mortgage rates and affordability, commercial growth and acquisition execution will need to carry more of the recovery.
2. Veralto Corporation (NYSE:VLTO)
Number of Hedge Fund Holders: 46
Veralto Corporation (NYSE:VLTO) supplies water-testing instruments, treatment chemicals, and disinfection technologies that help utilities and industrial customers maintain water quality. Its exposure to everyday treatment operations supports demand even when customers postpone major infrastructure projects.
Approximately 60% of Water Quality revenue is recurring, while industrial applications account for half the segment’s sales. Chemicals, servicing, and replacement equipment keep existing facilities running, giving Veralto Corporation a broad revenue base across municipal and industrial customers.
Recent results support that resilience. Hach’s North American municipal sales grew at a high-single-digit rate in Q3 2026. RBC highlighted that performance on November 2 as evidence against concerns over municipal budget pressure, raising its target on Veralto Corporation to $121 while maintaining Sector Perform.
Acquisitions are expanding the treatment offering. Cleanwater1 adds disinfection, odor-control, and solids-management technologies alongside an installed base of approximately 25,000 pieces of equipment. Its products could complement Trojan’s ultraviolet treatment systems and create opportunities to sell additional solutions to existing customers.
The financial contribution needs time to develop. Management expects Cleanwater1 to dilute near-term margins, even as cost savings support earnings. That makes our earlier coverage of why Brown Advisory questioned Veralto’s dependence on acquisitions for faster growth relevant to the current investment case.
Veralto Corporation raised full-year adjusted EPS guidance to $4.49–$4.52, implying 15%–16% growth. Sustaining that progress will require continued strength in recurring treatment sales and successful integration of its expanding technology portfolio.
1. Ecolab Inc. (NYSE:ECL)
Number of Hedge Fund Holders: 62
Ecolab Inc. (NYSE:ECL) helps industrial customers treat and reuse water through chemicals, monitoring systems, and on-site services. Its appeal is that reducing water consumption can also lower customers’ operating costs and improve production, giving them a financial reason to adopt its solutions.
That opportunity is expanding in semiconductor manufacturing. Management says combining Ovivo’s ultrapure-water systems with Ecolab’s recycling capabilities can enable fabs to reuse more than 80% of their water. Cleaner process water can also improve chip yields, making treatment performance increasingly valuable as manufacturing becomes more demanding.
Global High-Tech organic sales grew 63% in Q3 2026, supported by semiconductor water applications and data-center cooling. Acquired businesses added further momentum, with CoolIT more than doubling sales and Ovivo delivering double-digit growth against pre-acquisition levels.
Growth elsewhere strengthens the case. Light Water accelerated to 5%, while Food & Beverage grew 8% as customers adopted combined hygiene and water-management programs. These businesses give Ecolab Inc. opportunities beyond AI infrastructure.
Pricing is helping protect profitability. Citi raised its target on Ecolab Inc. to $345 from $330 on October 28 and maintained Buy, noting that price increases were running ahead of costs.
Investors still need to weigh those advantages against expectations. Our October analysis explores whether Ecolab’s customer retention and expanding water business justify its premium valuation.
Management cautioned against extrapolating the latest High-Tech growth rate. Sustained returns will depend on integrating acquisitions and maintaining pricing as Ecolab Inc. invests to meet demand.
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