November 28, 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 November 28, 2024 in the market index SDG 6 because of its high performance in at least one of the Obermatt investment strategies. Three consolidated Obermatt Ranks are above-average. Only the Value Rank is below average. The investment rationale may be an investment in future growth, supported by professional market opinion. Based on the Obermatt 360° View of 76 (top 76% performer), Obermatt assesses an overall strong buy recommendation for SABESP on November 28, 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 | November 28, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 24 |
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| GROWTH | ||||||||
| GROWTH | 86 |
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| SAFETY | ||||||||
| SAFETY | 50 |
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| SENTIMENT | ||||||||
| SENTIMENT | 100 |
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| 360° VIEW | ||||||||
| 360° VIEW | 76 |
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ANALYSIS: With an Obermatt 360° View of 76 (better than 76% 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 Growth Rank has a good rank of 86, 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. This means that growth is higher than for 86% of competitors in the same industry. The consolidated Safety Rank at 50 means that the company has a financing structure that is safer than 50% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. Finally, the consolidated Sentiment Rank has a good rank of 100, which means that professional investors are more optimistic about the stock than for 100% of alternative investment opportunities. But the consolidated Value Rank is less desirable at 24, meaning that the share price of SABESP is on the higher side compared with indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 76% of alternative stocks in the same industry. ...read more
RECOMMENDATION: With a consolidated 360° View of 76, SABESP is better positioned than 76% of all alternative stock investment opportunities based on the Obermatt Method. As three out of four consolidated Obermatt Ranks exhibit excellent performance, such as above-average growth (Growth Rank of 86), a safe financing structure (Safety Rank of 50), and positive professional market sentiment (Sentiment Rank of 100), it is a solid stock investment where growth may be the strongest driver of the investment rationale, also reflected by institutional investors. It is typical for growth companies to have low value, as is the case here. Investors are willing to pay more for companies that outperform their competitors. So the question is, how much more do you pay for the stock of SABESP compared with alternatives? You can use the following rule of thumb: The growth rank measures the growth momentum of the company (86% better than peers). The value rank could be the reverse reflection of that (14%). A Value Rank below that level may be assessed as expensive, a rank above that is still good value. Sometimes market sentiment just reflects the past, sometimes the reality. You pay more than the market average for this stock, but it may be worth it. ...read more
Sentiment Strategy: Professional Market Sentiment for SABESP very positive
ANALYSIS: With an Obermatt Sentiment Rank of 100 (better than 100% 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 four indicators above average for SABESP. Analyst Opinions are at a rank of 80 (better than 80% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 56, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in SABESP. The Professional Investors rank is 92, which means that currently, professional investors hold more stock in this company than in 92% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 62 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 62% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 100 (more positive than 100% compared with investment alternatives), SABESP has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean SABESP stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: SABESP Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 24 (worse than 76% compared with alternatives), SABESP shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with all four indicators below average for SABESP. Price-to-Sales is 27 which means that the stock price compared with what market professionals expect for future profits is higher than 73% of comparable companies, indicating a low value concerning SABESP's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Price-to-Book Rank of 38, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of SABESP. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 45 and Dividend Yield, which is lower than 77% of comparable companies, also make the stock more expensive compared with investment alternatives. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 24, is a sell recommendation based on SABESP's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for SABESP? One reason may be that the company is simply too popular. If enough people want a particular stock, its price can exceed reasonable levels. This is often the case for companies offering new and exciting products and everybody wants a piece of the action. Should you pay a lot for a hot stock such as SABESP? It's risky, and even if the stock price continues to grow because of popular demand, it may return to more typical lower levels later. And that return can be sudden and quick, making it impossible for retail investors to exit on time. Sometimes, high prices are deserved. This is the case when it is justified to believe that the company will dominate a market with high profit margins. It has happened in the past for many technology companies and indeed for commercially successful pharmaceutical discoveries. Sometimes they last, sometimes, they get eaten alive. SABESP may be such a type of stock. That would mean, retail investors should be careful, only considering investing a small part of their wealth in this exciting category and always being ready to lose more than half, if not all of the investment. ...read more
Growth Strategy: SABESP Growth Momentum high
| GROWTH METRICS | November 28, 2024 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 30 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 90 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 90 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 78 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 86 |
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ANALYSIS: With an Obermatt Growth Rank of 86 (better than 86% 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 but one indicator above average for SABESP. Profit Growth has a rank of 90 which means that currently professionals expect the company to grow its profits more than 90% of its competitors. The same is valid for capital growth and stock returns. Capital Growth has a rank of 90, and Stock Returns has a rank of 78 which means that the stock returns have recently been above 78% of alternative investments. Only revenue growth is low with a Sales Growth has a rank of 30 (70% of its competitors are better). ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 86, is a buy recommendation for growth and momentum investors. The many positive growth indicators indicate a positive growth momentum with only low revenue growth. That can also be attributed to divestments or the sale of unprofitable businesses. If that is the reason, overall growth is well on track to making this stock attractive for growth investors. ...read more
Safety Strategy: SABESP Debt Financing Safety above-average
| SAFETY METRICS | November 28, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 63 |
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| REFINANCING | ||||||||
| REFINANCING | 26 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 64 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 50 |
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ANALYSIS: With an Obermatt Safety Rank of 50 (better than 50% compared with alternatives), the company SABESP has financing practices on the safer side, which mean that their overall debt burden is lower than average. This doesn't mean that the business of SABESP is safe, it only means that the company is on the safer side regarding possible bankruptcy, 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 63, meaning the company has a below-average debt-to-equity ratio. It has less debt than 63% of its competitors. Liquidity is also good at a rank of 64, meaning the company generates more profit to service its debt than 64% 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 26, 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 74% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 50 (better than 50% compared with alternatives), SABESP has a financing structure that is safer 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 Above-Average Financial Performance
| COMBINED PERFORMANCE | November 28, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 24 |
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| GROWTH | ||||||||
| GROWTH | 86 |
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| SAFETY | ||||||||
| SAFETY | 64 |
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| COMBINED | ||||||||
| COMBINED | 58 |
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ANALYSIS: With an Obermatt Combined Rank of 58 (better than 58% compared with investment alternatives), SABESP (Water Utilities, Brazil) shares have above-average financial characteristics compared with similar stocks. Shares of SABESP are low in value (priced high) with a consolidated Value Rank of 24 (worse than 76% of alternatives). But they show above-average growth (Growth Rank of 86) and are safely financed (Safety Rank of 50, which means below-average debt burdens). ...read more
RECOMMENDATION: A Combined Rank of 58, is a buy recommendation based on SABESP's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company SABESP exhibits low value (Obermatt Value Rank of 24), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 86). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 50) are a double-edged sword: if the company continues growing, low debt limits shareholder returns. But if the company increases its debt, it will also increase risk. In other words, this is an investment on the safer side, despite the above-average price (low value). ...read more
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