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Tuesday, 07/31/2007 10:07:41 PM

Tuesday, July 31, 2007 10:07:41 PM

Post# of 8

We rate SJW CORP (SJW) a BUY. This is driven by several positive factors, which we believe should have a
greater impact than any weaknesses, and should give investors a better performance opportunity than most
stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid
stock price performance, notable return on equity and largely solid financial position with reasonable debt
levels by most measures. We feel these strengths outweigh the fact that the company has had sub par
growth in net income.

SJW's revenue growth trails the industry average of 41.8%. Since the same quarter one year prior, revenues
rose by 15.6%. This growth in revenue does not appear to have trickled down to the company's bottom line,
displayed by a decline in earnings per share.
Compared to its closing price of one year ago, SJW's share price has jumped by 30.00%, exceeding the
performance of the broader market during that same time frame. Looking ahead, the stock's sharp rise over
the last year has already helped drive it to a level which is relatively expensive compared to the rest of its
industry. We feel, however, that other strengths this company displays justify these higher price levels.
The return on equity has improved slightly when compared to the same quarter one year prior. This can be
construed as a modest strength in the organization. Compared to other companies in the Water Utilities
industry and the overall market on the basis of return on equity, SJW CORP has outperformed in comparison
with the industry average, but has underperformed when compared to that of the S&P 500.
SJW's debt-to-equity ratio of 0.87 is somewhat low overall, but it is high when compared to the industry
average, implying that the management of the debt levels should be evaluated further. Regardless of the
somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 1.20 is sturdy.
SJW CORP has exprienced a steep decline in earnings per share in the most recent quarter in comparison to
its performance from the same quarter a year ago. This company has reported somewhat volatile earnings
recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year,
SJW CORP increased its bottom line by earning $2.09 versus $1.19 in the prior year. For the next year, the
market is expecting a contraction of 43.1% in earnings ($1.19 versus $2.09).


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