5-Star Stocks Poised to Pop: Sabesp

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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 (NYS: 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 (1954)
Market Cap$6.6 billion
IndustryWater utilities
Trailing-12-Month Revenue$5.9 billion
Management

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
CompetitorsVeolia Environnement (NYS: VE)

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

On CAPS, 99% of the 1,071 members who have rated Sabesp believe the stock will outperform the S&P 500 going forward. These bulls include ts2006 and TMFBiggles.

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 (NYS: AWK) (16) and Aqua America (NYS: 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.

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!

Interested in another easy way to track Sabesp?Add it to your watchlist.

At the time this article was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Aqua America. The Motley Fool owns shares of Veolia. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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