Water utilities and water-related tech companies stopped doing the kind of deals that built industry players like GE Water, American Water Works and Aqua America (all based in the Philadelphia area) during the credit crisis of the late 2000s, and have instead piled up cash "at a record clip," writes water-stock analyst Ryan M. Connors at Janney Capital Markets in a report to clients.

The stronger cash positions and lower debt ratios started off as a hedge against weak credit markets that had made it tough to borrow money. But the cash cushions now give companies incentives to start buying smaller firms again.  

Connors notes the value of US industrial-company acquisitions topped $100 billion in the first quarter for the first time since early 2008, citing data from Standard & Poor's Capital IQ.

But Connors also points out that small, specialty water-company stocks have already risen to reflect fat premiums - while shares of potential acquirers like American Water Works, for example, languish at a relatively modest 14 times earnings. While he'd like to see "strategically compelling acquisitions at attractive valuations," or at least "high-return capital investments," Connors said a lot of the surplus should flow back to company owners through share buybacks.