SBS
Companhia de Saneamento Básico do Estado de São Paulo - SABESP
$5.61
Platform & Compounding FCF
85%
Two-stage FCF DCF
Strong
·
Conviction
Undervalued
Trading 64.5% below fair value
You pay
$5.61
Bear
$9.08
Fair
$15.79
Bull
$23.45
Bear
$9.08
+61.9%
10% stage 1 growth, 11% discount
Fair
$15.79
+181.5%
16% stage 1 growth, 11% discount
Bull
$23.45
+318.0%
21% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (16% base case)
Terminal Value % of EV
44%
Implied Market Multiple
15.8x
Market is pricing in (growth)
5.8%
vs 16.0% base
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $23.79 from 7 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $15.79 per share.
Warnings
Wall Street's average price target is $23.79 (from 7 analysts). Our estimate is 42% below the consensus -- consider that gap carefully.
Financial statements were converted from BRL into USD using USDBRL at 0.1963 USD per BRL.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions