Companhia Sanea (SBS)

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RECOMMENDATION

We rate CIA SANEAMENTO BASICO ESTADO (SBS) a BUY. This is driven by multiple strengths, which we
believe should have a greater impact than any weaknesses, and should give investors a better performance
opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its
solid stock price performance, robust revenue growth, attractive valuation levels, expanding profit margins
and good cash flow from operations. We feel these strengths outweigh the fact that the company has had
somewhat disappointing return on equity.

HIGHLIGHTS

Powered by its strong earnings growth of 90.66% and other important driving factors, this stock has surged by
29.93% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the
stock's future course, although almost any stock can fall in a broad market decline, SBS should continue to
move higher despite the fact that it has already enjoyed a very nice gain in the past year.
SBS's revenue growth trails the industry average of 60.5%. Since the same quarter one year prior, revenues
rose by 30.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
46.50% is the gross profit margin for CIA SANEAMENTO BASICO ESTADO which we consider to be strong. It
has increased from the same quarter the previous year. Along with this, the net profit margin of 20.40% is
above that of the industry average.
Net operating cash flow has increased to $307.91 million or 10.17% when compared to the same quarter last
year. Despite an increase in cash flow, CIA SANEAMENTO BASICO ESTADO's cash flow growth rate is still
lower than the industry average growth rate of 41.81%.