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Companhia De Saneamento Basico Do Estado De Sao (SBS)
NYSE:SBS

Companhia De Saneamento (SBS) AI Stock Analysis

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Companhia De Saneamento

(NYSE:SBS)

Rating:76Outperform
Price Target:―
Companhia De Saneamento's overall stock score reflects strong financial performance and attractive valuation. The company's robust revenue and profit growth demonstrate effective management and operational efficiency. The stock's technical indicators show positive momentum, though caution is warranted due to overbought signals. The low P/E ratio suggests potential undervaluation, making it an appealing investment opportunity. However, the absence of current earnings call data and corporate events limits further insight into the company's short-term prospects.
Positive Factors
Earnings
Sabesp reported a strong 4Q24 results with R$3bn adj. EBITDA, up 4% YoY and 6% above analyst estimates.
Operational Efficiency
The strong 4Q24 results were mostly driven by faster-than-expected cost-cutting initiatives.
Regulatory Environment
Change in regulation could add R$4-6bn NPV, positively impacting Sabesp's financials by fixing delays on capex recognition.
Negative Factors
Market Position
Despite being a top pick within Brazilian Utilities, Sabesp's market position could face challenges without continued operational improvements.
Regulatory Uncertainty
The end of the revenue gap is not seen as a risk, but regulatory changes and initiatives could impact financial stability if not managed well.

Companhia De Saneamento (SBS) vs. SPDR S&P 500 ETF (SPY)

Companhia De Saneamento Business Overview & Revenue Model

Company DescriptionCompanhia 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 MoneySABESP generates revenue primarily through the provision of water supply and sewage services. The company charges its customers based on water consumption and sewage generation, with a tiered pricing model that varies by customer category, such as residential, commercial, or industrial. This pricing model is typically regulated by state authorities to ensure affordability and fairness. In addition to direct service charges, SABESP may also engage in infrastructure projects, partnerships, and government contracts that contribute to its revenue. Additionally, the company may receive financial support or subsidies from government entities to undertake large-scale infrastructure investments aimed at expanding and improving its service network.

Companhia De Saneamento Earnings Call Summary

Earnings Call Date:May 12, 2025
(Q3-2024)
|
% Change Since: 4.00%|
Next Earnings Date:Aug 11, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture. While there were positive developments in revenue and EBITDA growth, operational cash generation, and new strategic directions post-privatization, significant challenges remain. These include regulatory impacts, transition costs, and construction delays. The company is focused on overcoming these hurdles with a new management team and investment strategies.
Q3-2024 Updates
Positive Updates
Revenue and EBITDA Growth
Net revenue increased by 7%, and EBITDA grew by 17% driven by a 2% increase in volume and pricing adjustments.
Operational Cash Generation
Generated operational cash of BRL 1.6 billion, which was almost entirely reinvested in the asset base.
Strategic Privatization and Transition
Privatization process enabled SABESP to transition from a state-owned model to a private one, allowing for potential operational and financial improvements.
Investment Program
Completion of BRL 1.4 billion investment this quarter with a significant investment program planned, including over BRL 60 billion for universalization of services.
Formation of New Management Team
New management team established to guide SABESP through privatization and operational transformation.
Negative Updates
Impact of Regulatory Adjustments
Revenue impacted by regulatory adjustments, including a 1% tariff reduction post-privatization.
Concession Contract Challenges
New concession contract presents challenges with regulatory parameters and tariff reviews.
Transition and Non-Recurring Costs
Incurred costs associated with privatization and transition, leading to non-recurring effects on operations.
Gap in Commercial Programs
Identified gaps in commercial programs leading to approximately 500 contract terminations.
Construction Delays
Delays in construction works attributed to transition period, with ongoing efforts to accelerate execution.
Company Guidance
During the Q3 2024 earnings call for SBSP3.SA, the management team provided comprehensive guidance on several financial metrics and strategic initiatives. Daniel Szlak, the CFO, detailed a 7% increase in net revenue, translating into a 17% rise in EBITDA, driven by a 2% growth in volume and pricing adjustments. The company reported a gross revenue impact of approximately BRL 8.8 billion due to deferred revenue adjustments under IFRS 12. Operational cash generation stood at BRL 1.6 billion, reinvested into the asset base. The privatization transition incurred non-recurring costs, yet the company saw a 6.4% tariff readjustment, netting a positive effect of around 5%. Additionally, SABESP completed BRL 1.4 billion in investments this quarter, with expectations to reach BRL 6.5 to 7 billion by year-end, despite transitioning from public to private procurement processes. The call also highlighted the company's strategic focus on universal sanitation, cost control, and an efficient capital structure, aiming to leverage a planned BRL 60 billion investment over five years.

Companhia De Saneamento Financial Statement Overview

Summary
Companhia De Saneamento exhibits strong financial health across all three financial statements. The company's revenue and profit growth are impressive, reflecting effective management and operational efficiency. The balance sheet is well-structured with moderate leverage and strong equity backing. Cash flows are robust, supporting ongoing operations and potential growth initiatives. However, there is potential for further optimization in cash flow generation and asset utilization.
Income Statement
85
Very Positive
The income statement shows robust growth with a significant increase in total revenue from the previous year. The Gross Profit Margin stands at 54.07%, and the Net Profit Margin is 26.50%, both indicating strong profitability. Notably, the revenue growth rate is an impressive 41.34% from 2023 to 2024. The EBIT Margin is 42.92%, and the EBITDA Margin is 50.12%, reflecting excellent operational efficiency. Overall, the company demonstrates strong financial performance.
Balance Sheet
78
Positive
The balance sheet reveals a healthy financial position with a Debt-to-Equity Ratio of 0.68, indicating moderate leverage. The Return on Equity (ROE) is 25.94%, showcasing efficient use of equity. The Equity Ratio is 45.60%, pointing to a solid equity cushion. While the company is well-capitalized, there is room for improvement in asset utilization.
Cash Flow
72
Positive
The cash flow statement highlights a strong Free Cash Flow growth rate of 55.09% from 2023 to 2024. The Operating Cash Flow to Net Income Ratio is 0.77, suggesting efficient cash generation from operations. The Free Cash Flow to Net Income Ratio is 0.76, indicating that a substantial portion of net income is converted into free cash flow. Although cash flows are robust, further improvement in conversion ratios could enhance overall cash flow strength.
Breakdown
Dec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
36.15B25.57B22.06B19.49B17.80B
Gross Profit
19.54B9.52B7.70B6.69B6.62B
EBIT
15.51B6.35B4.62B4.10B4.49B
EBITDA
18.11B8.96B8.06B6.28B4.16B
Net Income Common Stockholders
9.58B3.52B3.12B2.31B973.32M
Balance SheetCash, Cash Equivalents and Short-Term Investments
5.38B3.27B3.55B3.15B3.81B
Total Assets
80.97B61.47B57.21B53.17B50.42B
Total Debt
25.26B19.54B18.96B17.72B17.26B
Net Debt
23.58B18.70B17.09B17.01B16.86B
Total Liabilities
44.04B31.61B29.87B28.23B27.62B
Stockholders Equity
36.93B29.86B27.33B24.93B22.79B
Cash FlowFree Cash Flow
7.30B4.71B3.89B3.86B4.94B
Operating Cash Flow
7.40B4.85B3.97B3.91B4.98B
Investing Cash Flow
-9.98B-4.91B-2.88B-2.66B-6.77B
Financing Cash Flow
3.42B-977.84M60.30M-929.02M-66.35M

Companhia De Saneamento Technical Analysis

Technical Analysis Sentiment
Positive
Last Price20.82
Price Trends
50DMA
19.83
Positive
100DMA
18.36
Positive
200DMA
17.15
Positive
Market Momentum
MACD
0.22
Positive
RSI
57.00
Neutral
STOCH
83.58
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 20.82 is above the 20-day moving average (MA) of 20.64, above the 50-day MA of 19.83, and above the 200-day MA of 17.15, indicating a bullish trend. The MACD of 0.22 indicates Positive momentum. The RSI at 57.00 is Neutral, neither overbought nor oversold. The STOCH value of 83.58 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SBS.

Companhia De Saneamento Risk Analysis

Companhia De Saneamento disclosed 39 risk factors in its most recent earnings report. Companhia De Saneamento reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Companhia De Saneamento Peers Comparison

Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
AWAWK
77
Outperform
$27.42B25.6010.43%2.34%11.79%11.69%
SBSBS
76
Outperform
$14.25B7.7728.57%2.62%26.64%151.43%
75
Outperform
$10.68B17.099.78%3.39%16.41%5.65%
HTHTO
74
Outperform
$1.83B17.777.49%3.14%12.34%11.78%
AWAWR
69
Neutral
$3.01B24.1413.95%2.37%6.79%5.96%
64
Neutral
$8.62B10.394.24%4.63%4.07%-13.04%
CWCWT
63
Neutral
$2.78B20.508.67%2.57%3.83%-8.75%
* Utilities Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
SBS
Companhia De Saneamento
20.82
7.07
51.42%
AWR
American States Water
78.14
9.47
13.79%
AWK
American Water
141.44
15.68
12.47%
WTRG
Essential Utilities
38.05
2.23
6.23%
CWT
California Water Service
46.33
0.15
0.32%
HTO
H2O America
52.98
2.35
4.64%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.