SABESP (NYSE:SBS) Emerges as a Strong CAN SLIM Investment Candidate

Companhia de Saneamento Basico do Estado de Sao Paulo SABESP (NYSE:SBS), a leading Brazilian water and sewage utility, has recently appeared on a stock screen built around the CAN SLIM investment strategy. This methodology, created by William O'Neil, combines fundamental and technical analysis to find high-growth market leaders positioned for significant price increases. The system's acronym describes its main parts: strong Current quarterly earnings, solid Annual earnings growth, a New product or service, limited Supply of shares along with strong Demand, Leadership in its industry, Institutional sponsorship, and a good Market direction.

Current and Annual Earnings Strength

The "C" and "A" in CAN SLIM require outstanding earnings power, and SBS meets this with notable recent results. The company's fundamental condition is a main part of its attractiveness.

• Quarterly EPS Growth: 76.3%
• Quarterly Sales Growth: 32.8%
• 3-Year Annual EPS Growth Rate: 60.8%
• Return on Equity (ROE): 26.7%

These numbers are not just acceptable; they are excellent. The large quarterly growth in both earnings and sales meets O'Neil's need for "big or accelerating" current performance. Also, the significant 60.8% three-year EPS growth rate shows this is not a single-quarter event but part of a continuing pattern of annual earnings gains, which is important for finding companies with lasting competitive strengths. The ROE of 26.7% is very high, showing efficient use of shareholder capital and going well beyond the system's usual minimum.

Leadership and Institutional Sponsorship

A main idea of CAN SLIM is to invest in market leaders, not followers. SBS shows clear leader qualities both in its sector and the wider market.

• Relative Strength: 87.1
• Industry Outperformance: SBS performs better than 84% of its peers in the Water Utilities industry.

A relative strength rating of 87.1 means that SBS is performing better than most all stocks in the market. This technical measure fits with the "L" in CAN SLIM, confirming that the stock is a leader. From an institutional view ("I"), the ownership level of about 40% suggests good sponsorship without being too high. This allows for more institutions to find and invest in the stock, possibly creating future buying interest.

Supply, Demand, and Market Direction

The "S" part looks at the balance between share supply and investor demand. SBS has a good profile here, with a reasonable level of debt and solid recent trading activity. The company's debt-to-equity ratio of 0.65 shows a careful approach to leverage, which is a positive sign of financial condition and lowers risk.

From a technical view, the "M" for market direction is also positive. Both the short-term and long-term trends for SBS are good, and this strength is happening within a generally positive trend for the S&P 500. The stock is now trading near its 52-week high, a feature often liked by CAN SLIM investors as it can signal a move upward from a period of consolidation.

High-Level Analysis Summary

A look at the company's technical analysis shows a very high rating of 10 out of 10, backed by good trends across all major time frames. The fundamental analysis report gives a firm rating of 6 out of 10, pointing out exceptional profitability measures but noting some questions about future earnings growth estimates. The overall view is of a financially sound company with excellent current profitability and strong market momentum.

A Strong Candidate for Growth Investors

Companhia de Saneamento Basico do Estado de Sao Paulo SABESP (SBS) presents a strong case for investors using the CAN SLIM methodology. It satisfies or goes beyond many of the strategy's measurable criteria, including large quarterly earnings growth, high annual earnings gains, superior market leadership, and a good technical position within a positive market environment. While investors should always do their own research, especially concerning the company's growth path in its specific geographic market, SBS fits well with the ideas of looking for high-growth market leaders.

To see other companies that now match the CAN SLIM investment criteria, you can view the live results of the screen here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any security. All investments involve risk, including the possible loss of principal. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.