April 18, 2024
Top 10 Stock SABESP Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: SABESP – Top 10 Stock in SDG 6: Clean Water and Sanitation
SABESP is listed as a top 10 stock on April 18, 2024 in the market index SDG 6 because of its high performance in at least one of the Obermatt investment strategies. As three out of four consolidated Obermatt Ranks exhibit excellent performance, it is a solid investment where the risk of paying too much for the shares is low. Based on the Obermatt 360° View of 94 (top 94% performer), Obermatt assesses an overall strong buy recommendation for SABESP on April 18, 2024.
Snapshot: Obermatt Ranks
| Country | Brazil |
| Industry | Water Utilities |
| Index | BOVESPA, SDG 6, Water Tech |
| Size class | X-Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View SABESP Strong Buy
| 360 METRICS | April 18, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 53 |
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| GROWTH | ||||||||
| GROWTH | 100 |
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| SAFETY | ||||||||
| SAFETY | 43 |
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| SENTIMENT | ||||||||
| SENTIMENT | 94 |
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| 360° VIEW | ||||||||
| 360° VIEW | 94 |
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ANALYSIS: With an Obermatt 360° View of 94 (better than 94% compared with alternatives) for 2024, overall professional sentiment and financial characteristics for the stock SABESP are very positive. The 360° View is based on consolidating four consolidated indicators, with all but one indicator above average for SABESP. The consolidated Value Rank has an attractive rank of 53, which means that the share price of SABESP is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means the stock price is lower than for 53% of alternative stocks in the same industry. The consolidated Growth Rank has a good rank of 100, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth, as well as stock returns. In addition, professional market sentiment is above average compared with other stock investment alternatives with a Sentiment Rank of 94. But the company’s financing is risky with a Safety rank of 43. This means 57% of comparable companies have a safer financing structure than SABESP. ...read more
RECOMMENDATION: With a consolidated 360° View of 94, SABESP is better positioned than 94% of all alternative stock investment opportunities based on the Obermatt Method. As three out of four consolidated Obermatt Ranks exhibit excellent performance, such as good value (Value Rank of 53), above-average growth (Growth Rank of 100), and positive market sentiment in the professional investor community (Sentiment Rank of 94), it is a solid stock investment where the risk of paying too much for the shares is limited, and disappointments are less likely, unless information not publicly available. Only the company financing structure is on the riskier side (Safety Rank of 43), but that would also mean better returns for shareholders if things work out well. Good value is sometimes an indication that the company's future is challenging. If they have been growing above average and are still a good value, it may indicate that this will not continue. We recommend evaluating whether the future of SABESP is as difficult as the low price of the stock, despite good growth and positive professional investor sentiment, suggests. Since the professional community is optimistic, you might have less to worry about, and the stock is just not sufficiently visible right now, which may indicate good timing. ...read more
Sentiment Strategy: Professional Market Sentiment for SABESP very positive
ANALYSIS: With an Obermatt Sentiment Rank of 94 (better than 94% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock SABESP is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for SABESP. Analyst Opinions are at a rank of 79 (better than 79% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. In addition, Analyst Opinions Change has a rank of 79, which means that stock research experts are changing their opinions for the better in recommending investing in the company. In other words, they are getting even more optimistic about investments in SABESP. Finally, the Professional Investors rank is 98, which means that currently, professional investors hold more stock in this company than in 98% of alternative investment opportunities. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 94 (more positive than 94% compared with investment alternatives), SABESP has a reputation among professional investors that is significantly higher than that of its competitors. Pros tend to favor investing in this company. But there is also a signal for caution. Market Pulse has a rank of 39, which means that the current professional news and professional social networks tend to be negative when discussing this company (more negative news than for 61% of competitors). This could mean future risks and should make investors careful. Attention to negative news for SABESP is worthwhile because they may be early warning signals. Without those, all other professional signals are encouraging, especially since analysts are getting more optimistic. ...read more
Value Strategy: SABESP Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 53 (better than 53% compared with alternatives), SABESP shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for SABESP. Price-to-Profit (also referred to as price-earnings, P/E) is 69 which means that the stock price compared with what market professionals expect for future profits is lower than for 69% of comparable companies, indicating a good value concerning SABESP's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 53, which means that the stock price is lower as regards to invested capital than for 53% of comparable investments. On the other hand, Price-to-Sales is less favorable than for 61% of alternatives (only 39% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than for 62% of comparable companies, making the stock more expensive compared with the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 53, is a buy recommendation based on SABESP's stock price compared with the company's operational size and dividend yields. This is a puzzling picture, because it means that profits are high while dividends are low. Since the stock price is low compared with invested capital but high concerning expected revenues, the company has more invested capital than peers for generating the same amount of revenue. Since profits are higher, it could be a "cash cow" situation (using the classic Boston Consulting Group or BCG matrix naming convention) where the company is on a downward trend, still living from the profits of past products. As the company pays low dividends, it may harbor the opinion that a turnaround is possible, and it rather invests the cash than distribute it to shareholders through dividends, thus sealing the company's fate early. Any investment optimism should only be a buy trigger once thorough research is completed. ...read more
Growth Strategy: SABESP Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 100 (better than 100% compared with alternatives) for 2024, SABESP shows one of the highest growth dynamics in its industry. Investors also speak of high momentum. The Growth Rank is based on consolidating four value indicators, with all four indicators above average for SABESP. Sales Growth has a value of 95, which means that, currently, professionals expect the company to grow more than 95% of its competitors. The same is valid for Profit Growth with a value of 66 and for Capital Growth with 92. In addition, Stock Returns had an above-average rank value of 81, which means they have been higher than 81% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 100, is a buy recommendation for growth and momentum investors. Since all Growth Ranks are positive, SABESP exhibits above-average growth momentum. This could be due to a uniquely strong market position, proprietary technology, or an extensive corporate acquisition strategy. Growth investors will find this an attractive investment opportunity, unless they expect that the current phase is transitory and will deteriorate in the future. The current performance could also be a temporary recovery from a very low point, such as a turn-around situation. In the case of a turn-around, the current performance may or may not be followed by a continuing positive development. ...read more
Safety Strategy: SABESP Debt Financing Safety below-average
| SAFETY METRICS | April 18, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 60 |
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| REFINANCING | ||||||||
| REFINANCING | 25 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 59 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 43 |
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ANALYSIS: With an Obermatt Safety Rank of 43 (better than 43% compared with alternatives), the company SABESP has financing practices on the riskier side, which means that their overall debt burden is above the industry average. This doesn't mean that the business of SABESP is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with two out of three indicators above average for SABESP. Leverage is at a rank of 60, meaning the company has a below-average debt-to-equity ratio. It has less debt than 60% of its competitors. Liquidity is also good at a rank of 59, meaning the company generates more profit to service its debt than 59% of its competitors. This indicates that the company is on the safer side when it comes to debt service. But Refinancing is lower at a rank of 25, which means that the portion of the debt that is about to be refinanced is above-average. It has more debt in the refinancing stage than 75% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 43 (worse than 57% compared with alternatives), SABESP has a financing structure that is riskier than that of its competitors. The refinancing issues could be a short-term problem, especially if the company has reputation issues. Banks and investors don't like to refinance debt if there are clouds on the horizon. For this reason, investors should look at the refinancing environment for SABESP. Does it look safe that debt that is coming due can be covered with new debt? If that is the case, then the financing situation of the company is on the safer side. If not, it may be better to wait until refinancing has been completed and the Refinancing rank is good again. ...read more
Combined financial peformance: SABESP Top Financial Performance
| COMBINED PERFORMANCE | April 18, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 53 |
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| GROWTH | ||||||||
| GROWTH | 100 |
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| SAFETY | ||||||||
| SAFETY | 59 |
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| COMBINED | ||||||||
| COMBINED | 83 |
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ANALYSIS: With an Obermatt Combined Rank of 83 (better than 83% compared with investment alternatives), SABESP (Water Utilities, Brazil) shares have much better financial characteristics than comparable stocks. Shares of SABESP are a good value (attractively priced) with a consolidated Value Rank of 53 (better than 53% of alternatives), show above-average growth (Growth Rank of 100) but are riskily financed (Safety Rank of 43), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 83, is a strong buy recommendation based on SABESP's financial characteristics. As the company SABESP's key financial metrics exhibit excellent performance in two areas, such as good value (Obermatt Value Rank of 53) and above-average growth (Obermatt Growth Rank of 100), it could be argued that the risk-taking in financing (Obermatt Safety Rank of only 43) indicates that the company is optimistic about the future and sees debt as an opportunity to boost returns. More debt means more shareholder returns if everything goes well. However, higher debt burdens are risky when interest rates rise or the business deteriorates in a crisis. If you believe the company's future is market-typical or even better, this could be an argument for a share purchase. ...read more
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