5-Star Stocks Poised to Pop: SABESP

Based on the aggregated intelligence of 145,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Brazilian water utility Companhia de Saneamento Basico do Estado de Sao Paulo (SABESP) (NYSE: SBS  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at SABESP's business and see what CAPS investors are saying about the stock right now.

SABESP facts

Headquarters (Founded)

Sao Paulo, Brazil (1954)

Market Cap

$4.06 billion

Industry

Water utilities

Trailing-12-Month Revenue

$3.53 billion

Management

CEO Dr. Gesner Filho
CFO Rui Affonso

Return on Equity (Average, Past 3 Years)

10.2%

Cash / Debt

$206.1 million / $3.24 billion

Competitors

Veolia Environnement (NYSE: VE  )

CAPS Members Bullish on SBS Also Bullish on

Vale (NYSE: VALE  )
Petrobras (NYSE: PBR  )
Johnson & Johnson (NYSE: JNJ  )

CAPS Members Bearish on SBS Also Bearish on

Home Depot (NYSE: HD  )
American Eagle Outfitters (NYSE: AEO  )

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 99% of the 1,018 members who have rated SABESP believe the stock will outperform the S&P 500 going forward. These top-ranked bulls include globalsailor and aitraders.

Late last year, globalsailor summed up SABSEP in purely bullish terms:

It has little debt, reasonable earnings, it gets its income in Brazilian reals and it is trading ridiculously below its book value. Brazilian sanitation and water delivery will definitely have to improve so the growth prospects are quite good. If I had the money I'd buy the whole company.

In an earlier pitch, aitraders follows that line of thinking:

As the city of Sao Paolo, one of the world's biggest, continues to increase their middle class, they should have ability to grow network and rates as [Brazil] becomes one of [South America's] strongest economies.

Down side is effort required to keep up with financials (reported in REALS), govt. involvement, irregular dividend payments, and potential currency fluctuation, however, the basic service of providing water and sewage with govt. authorization is about as big a moat as you can get.

What do you think about SABESP, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Petrobras, SABESP, and Johnson & Johnson are Motley Fool Income Investor picks. Home Depot is a choice of Inside Value. The Fool's disclosure policy always gets a perfect score.


Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 03, 2010, at 1:03 PM, 123spot wrote:

    Thanks. Thought this one had fallen off of the radar (see CAPS discussion board and paucity of recent articles on FOOL).I bought this rec @ 48. Am amazed globalsailor thinks the debt noted in the chart provided is reasonable. There is also a recent failure of litigation in which SABESP thinks it is due a huge pension reimbursement from the govt., appeal of a negative decision on that is pending-but... Investors be careful with this one- was moving up nicely, then dropped hard. Anyone with more info?

  • Report this Comment On February 03, 2010, at 2:20 PM, tsabbe wrote:

    Please re-think this recommendation, the stock ticker SBS acts very suspicious. Read the evidence below:

    The float is very small at 400k shares

    It trades 300+k shares daily

    Debt $3 B, cash $31 M

    market vlue seems + cash, which is strange

    The cash flow statements produced annually are from 2007

    Best of luck on this one

  • Report this Comment On February 04, 2010, at 1:28 PM, 123spot wrote:

    Thanks tsabbe.

  • Report this Comment On February 04, 2010, at 1:29 PM, 123spot wrote:

    Any update from Tom G. who originally rec'd this?

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