Southwest Water Co. is having a tough time washing away its problems.

Shares in the L.A.-based company, which owns water utilities and provides management services, have plunged 60 percent in the last 90 days. The trouble started Nov. 10, when executives announced that auditors had found asset depreciation errors on its balance sheets. As a result, three years of financial reports must be restated, and the company had to delay announcing its third quarter earnings. That prompted a warning from Nasdaq.

The news triggered analyst downgrades, and the stock plunge led to shareholder lawsuits. The stock reached a 10-year low in late December before rebounding slightly on last week’s news that the company was selling a wholesale wastewater business in Texas.

The lack of up-to-date financial information makes it tough for analysts to evaluate Southwest Water.

“It’s difficult for us to say where the company is headed until we see updated financial reports,” said Heike Doerr, water sector research analyst with Philadelphia-based Janney Montgomery Scott LLC. “The world has changed since the last financials were issued.”

The accounting problems were uncovered by the company’s new auditors, PricewaterhouseCoopers LLP, which took over the auditing duties from longtime auditors KPMG LLP during 2008. A new management team had taken the reins at Southwest Water in mid-2007, led by Chief Executive Mark Swatek. Among other moves, Swatek and his team decided to switch auditors.

PricewaterhouseCoopers found errors in the way Southwest Water was depreciating assets of recently acquired water systems and that the cumulative net income going back three years had likely been overstated.

Southwest Water spokeswoman DeLise Keim said the corrected financials are due to be released in March. At that time, the company expects to be back in compliance with Nasdaq standards.

Keim said the company will fight the shareholder suits.

“We don’t believe that the lawsuits have merit and we plan to defend against them vigorously,” Keim said.

The company also reacted to the credit crunch. In October, Southwest Water announced it was suspending all but the most essential major capital expenditures until market conditions improved.

Keim said the sale of the Texas system was part of the new management team’s decision to concentrate on core operations and to divest noncore and underperforming assets.

The goal of the transition is to create a 50-50 balance of the company’s two types of business: ownership of water utilities and its other activities, including contract management and ownership of related facilities.

When Swatek took over, about 55 percent of revenues came from the second category. That percentage had declined to 52 percent as of June 2008.

“The margins are lower in the contract operations business,” noted analyst Doerr.