Companhia De Saneamento (SBS) AI Stock Analysis

• Market Cap: $13.83B
• Dividend Yield: 1.08%
• Average Volume (3M): 1.28M
• Price to Earnings (P/E): 7.8
• Beta (1Y): 0.36
• Revenue Growth: 41.72%
• EPS Growth: 195.04%
• Country: US
• Employees: 10,552
• Sector: Utilities
• Sector Strength: 88
• Industry: Regulated Water
• EPS (TTM): 2.55
• Shares Outstanding: 683,510,000
• 10 Day Avg. Volume: 1,403,323
• 30 Day Avg. Volume: 1,280,695
• PEG Ratio: 0.05
• Price to Book (P/B): N/A
• Price to Sales (P/S): 2.59
• Price to Cash Flow (P/CF): N/A
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $23.20
• Price Target Upside: 14.74% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 1

Companhia De Saneamento's overall stock score is elevated by its strong financial performance and attractive valuation. Despite potential regulatory challenges and transition costs highlighted in the earnings call, the company's robust revenue growth and profitability, along with its strategic focus, provide a solid foundation for future growth. However, caution is advised due to technical indicators suggesting potential short-term resistance.

Positive Factors

Earnings Growth

The company is expected to experience earnings growth with a 22% EBITDA compound annual growth rate over four years.

Financial Performance

Sabesp reported a strong 4Q24 results with R$3bn adj. EBITDA, up 4% YoY and 6% above estimates.

Operational Efficiency

The small beat was mostly driven by faster-than-expected cost-cutting initiatives.

Negative Factors

Regulatory Changes

Change in regulation could add R$4-6bn NPV, which could positively impact the company's financials by fixing delays on the capex recognition in the Regulatory Asset Base.

Regulatory Concerns

Sabesp's post-privatization initiatives are on track, addressing revenue gaps and regulatory concerns.

Companhia De Saneamento Business Overview & Revenue Model

Company Description

Companhia de Saneamento Básico do Estado de São Paulo – SABESP provides water and sewage services to residential, commercial, industrial, and governmental customers. It provides water supply, sanitary sewage, urban rainwater management and drainage, urban cleaning, and solid waste management services, as well as related activities, including the planning, operation, maintenance, and commercialization of energy. As of December 31, 2021, the company provided water services through 9.8 million water connections to approximately 27.8 million people; sewage services through 8.4 million sewage connections to approximately 24.6 million people; and operated 88,904 kilometers of water pipes and water transmission lines, as well as 61,122 kilometers of sewer lines. It also offers water and/or sewage services to four other municipalities through special purpose companies. The company was founded in 1954 and is headquartered in São Paulo, Brazil.

How the Company Makes Money

Companhia De Saneamento (SBS) generates revenue primarily through the provision of water supply and sewage services. The company's revenue model is based on charging customers for the consumption of water and the treatment of sewage. These charges are typically structured as tariffs, which are regulated by the state government to ensure affordability and access. SBS's key revenue streams include residential, commercial, and industrial water usage, as well as sewage collection and treatment services. In addition, the company may receive government subsidies or support for infrastructure projects, which can also contribute to its earnings. Strategic partnerships with municipalities and investments in infrastructure development further bolster its revenue generation capabilities.

Companhia De Saneamento Financial Statement Overview

Summary

Companhia De Saneamento's financial performance is solid, characterized by strong revenue growth and profitability, a stable balance sheet with moderate leverage, and effective cash flow management. The company is well-positioned in the regulated utilities sector, though it faces potential risks from regulatory changes and interest rate fluctuations. Overall, the financial health is robust with opportunities for sustained growth.

Income Statement

Companhia De Saneamento demonstrates strong revenue growth with a TTM revenue growth rate of 39.05% compared to the previous year. The company maintains a robust gross profit margin of 69.52% and a net profit margin of 26.23%. EBIT and EBITDA margins are also high at 44.76% and 52.92%, respectively, indicating strong operational efficiency and profitability. However, the industry is highly regulated, which may limit further margin expansion.

Balance Sheet

The balance sheet reflects a healthy equity ratio of 49.79%, suggesting a stable financial structure. The debt-to-equity ratio stands at 0.63, indicating moderate leverage that is manageable within the industry. Return on equity (ROE) is strong at 24.61%, showcasing effective use of equity to generate profits. However, the total debt level is significant, which could pose risks if interest rates rise or regulatory conditions change.

Cash Flow

Cash flow analysis reveals a positive free cash flow growth rate of 8.83% year-over-year. The operating cash flow to net income ratio is 0.69, suggesting that cash flows are supporting reported earnings effectively. The free cash flow to net income ratio is 0.44, indicating a substantial portion of earnings is translated into free cash flow, which is favorable for reinvestment and debt servicing. However, capital expenditures remain relatively high, which could impact free cash flow if not managed prudently.

Breakdown
TTM	Dec 2023	Dec 2022	Dec 2021	Dec 2020	Dec 2019
Income Statement		Total Revenue
35.57B	25.57B	22.06B	19.49B	17.80B	17.98B
	Gross Profit
24.73B	9.52B	7.70B	6.69B	6.62B	7.85B
	EBIT
15.92B	6.35B	4.62B	4.10B	4.49B	5.71B
	EBITDA
18.82B	8.96B	8.06B	6.28B	4.16B	7.30B
	Net Income Common Stockholders
9.33B	3.52B	3.12B	2.31B	973.32M	3.37B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
852.52M	3.27B	3.55B	3.15B	3.81B	2.25B
	Total Assets
22.00B	61.47B	57.21B	53.17B	50.42B	46.46B
	Total Debt
6.57B	19.54B	18.96B	17.72B	17.26B	13.24B
	Net Debt
5.71B	18.70B	17.09B	17.01B	16.86B	10.99B
	Total Liabilities
11.18B	31.61B	29.87B	28.23B	27.62B	24.82B
	Stockholders Equity
10.82B	29.86B	27.33B	24.93B	22.79B	21.64B
Cash Flow		Free Cash Flow
4.12B	4.71B	3.89B	3.86B	4.94B	4.12B
	Operating Cash Flow
6.45B	4.85B	3.97B	3.91B	4.98B	4.20B
	Investing Cash Flow
-8.29B	-4.91B	-2.88B	-2.66B	-6.77B	-3.27B
	Financing Cash Flow
2.64B	-977.84M	60.30M	-929.02M	-66.35M	-1.71B

Companhia De Saneamento Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 20.22
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SBS, the sentiment is Positive. The current price of 20.22 is above the 20-day moving average (MA) of 18.27, above the 50-day MA of 17.50, and above the 200-day MA of 16.43, indicating a bullish trend. The MACD of 0.59 indicates Negative momentum. The RSI at 72.75 is Negative, neither overbought nor oversold. The STOCH value of 96.96 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SBS.

Companhia De Saneamento Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SBS	81 Outperform	$13.83B	7.78	28.81%	1.08%	41.72%	195.04%
SJW	79 Outperform	$1.86B	18.97	7.23%	2.96%	11.65%	6.78%
CWT	77 Outperform	$3.06B	15.79	12.46%	2.26%	30.48%	267.73%
AWK	74 Outperform	$28.48B	27.10	10.44%	2.08%	10.63%	10.38%
WTRG	71 Outperform	$11.35B	18.99	9.84%	3.14%	1.57%	16.50%
AWR	69 Neutral	$3.13B	25.67	14.01%	2.25%	-0.04%	-5.82%
Sector *	63 Neutral	$8.57B	12.25	6.36%	4.41%	3.08%	-9.36%