Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, Brazilian water utility 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.
|Headquarters (founded)||Sao Paulo (1954)|
|Market Cap||$6.6 billion|
|Trailing-12-Month Revenue||$5.9 billion|
CEO Dilma Pena (since January 2011)
CFO Rui Affonso (since July 2003)
|Return on Equity (average, past 3 years)||9.8%|
|Cash/Debt||$1.36 billion / $5.06 billion|
|Competitors||Veolia Environnement (NYSE: VE )|
Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
Earlier this year, ts2006 succinctly summed up the Sabesp bull case: "water services in Brazil -- looks to grow and maintain profitability."
Currently, Sabesp even sports a cheapish forward P/E of eight. That represents a slight discount to competitor Veolia (9) and a much larger one compared to industry peers American Water Works (NYSE: AWK ) (16) and Aqua America (NYSE: WTR ) (21).
CAPS member TMFBiggles elaborates on the bargain opportunity:
P/E is less than HALF that of AWK. ... [L]arger service area, much greater potential for future deployment (really, how many people in the US are without running water, vs. people in Brazil?). ...
The only real worries are from political cronyism ruining its expansion plans or profitability, as the state of Sao Paulo owns half the company, but it's a monopoly provider to one of the wealthiest areas of Brazil, and it's not limited to that state, so could expand to the rest of Brazil in the future.
I think SBS could be very valuable down the line as not only a water/wastewater provider but a water exporter to other regions from the Sao Paulo operations, but that's just a theory.
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