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

The CAN SLIM investment methodology, created by William O'Neil, joins fundamental and technical analysis to find high-growth stocks with solid momentum potential. This methodical process assesses companies using seven main criteria represented by the acronym CAN SLIM, concentrating on earnings acceleration, institutional sponsorship, and market leadership. The plan aims to find companies displaying strong financial performance while also presenting technical strength that verifies institutional interest and market acknowledgment.

Recent Performance and Growth Metrics

Companhia de Saneamento Basico do Estado de Sao Paulo SABESP (NYSE:SBS) displays notable growth traits that fit CAN SLIM requirements. The Brazilian water utility company presents very good quarterly performance with:

• Quarterly EPS growth of 76.27% compared to the same quarter last year
• Revenue growth of 32.82% on a quarterly basis
• Three-year EPS compound annual growth rate of 60.79%

These growth numbers are much higher than the CAN SLIM minimum levels of 20% for quarterly EPS growth and 25% for annual earnings increases. The quickening earnings pattern shows the company is building operational speed, a main trait looked for by growth investors using the CAN SLIM methodology.

Profitability and Financial Health

SABESP's profitability measurements place it as a notable performer in the water utilities sector:

• Return on Equity of 27.61%, much above the 10% minimum requirement
• Profit margin of 27.76%, doing better than 93% of industry peers
• Operating margin of 44.20%, higher than all industry competitors

The company keeps a debt-to-equity ratio of 0.69, safely below the CAN SLIM limit of 2.0, showing careful financial management. This careful leverage method lowers financial risk while keeping operational flexibility, an important factor for growth investors who value lasting expansion over aggressive borrowing.

Technical Strength and Market Position

From a technical viewpoint, SABESP displays several traits preferred by CAN SLIM investors:

• Relative strength rating of 86.54, showing it does better than 86% of all stocks
• Trading near the high end of its 52-week price movement
• Good long-term trend with positive momentum

The company's institutional ownership is at 51.61%, much lower than the 85% limit, indicating potential for more institutional buying. This technical strength verifies that the market is acknowledging the company's fundamental progress, a key confirmation step in the CAN SLIM process that stops investors from purchasing fundamentally good stocks that lack market verification.

Valuation and Risk Considerations

SABESP shows an appealing valuation profile in spite of its strong performance:

• P/E ratio of 7.74, much lower than industry and S&P 500 averages
• Forward P/E of 11.49, representing fair growth compensation
• Enterprise value to EBITDA ratio lower than all industry peers

The company's fundamental analysis shows a solid overall rating of 6/10, with very good profitability scores balanced by average financial health ratings. Technically, the stock scores 8/10 with good relative performance, although recent price swings have formed some consolidation patterns that might need patience for best entry points. For full analysis, investors can examine the complete technical analysis report and fundamental analysis report.

Investment Conclusion

SABESP stands as a notable candidate for CAN SLIM investors looking for exposure to essential services with growth traits. The company joins strong fundamental measurements including quickening earnings, high profitability, and fair valuation with technical signs confirming market leadership. While the water utilities sector usually contains stable, slow-growth companies, SABESP's very good growth rates and operational effectiveness make it different as a possible growth leader within a defensive sector.

Investors curious about finding more CAN SLIM candidates can investigate our pre-configured screener for more investment ideas that meet these strict growth standards.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results.