Operating Margin - Companhia de Saneamento Basico do Estado de Sao Paulo SABESP (BOVESPA:SBSP3)

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Price: 136.85 BRL 1.74%

Market Cap: 93.5B BRL

44.2%

Current

29%

Average

13.8%

Industry

Operating Margin represents how efficiently a company is able to generate profit through its core operations.

Higher ratios are generally better, illustrating the company is efficient in its operations and is good at turning sales into profits.

Operating Margin

44.2%

Operating Profit

17.8B

Revenue

40.2B

Operating Margin Across Competitors

Country		Company	Market Cap	Operating Margin
BR		Companhia de Saneamento Basico do Estado de Sao Paulo SABESP BOVESPA:SBSP3	93.5B BRL	44%
US		American Water Works Company Inc NYSE:AWK	25.7B USD	37%
US		Essential Utilities Inc NYSE:WTRG	10.7B USD	39%
UK		United Utilities Group PLC LSE:UU	8B GBP	36%
UK		Severn Trent PLC LSE:SVT	8B GBP	29%
BR	B	Basic Sanitation Company of the State of Sao Paulo SABESP SWB:SAJA	6.1B EUR	44%
HK		Guangdong Investment Ltd HKEX:270	45.5B HKD	45%
CN		Grandblue Environment Co Ltd SSE:600323	24.4B CNY	23%
UK		Pennon Group PLC LSE:PNN	2.4B GBP	19%
HK		Beijing Enterprises Water Group Ltd HKEX:371	24.8B HKD	21%
CN		Beijing Capital Eco-Environment Protection Group Co Ltd SSE:600008	21.9B CNY	23%

Companhia de Saneamento Basico do Estado de Sao Paulo SABESP
Glance View

Market Cap

93.5B BRL

Industry

Utilities

Companhia de Saneamento Básico do Estado de São Paulo, commonly known as SABESP, stands as a crucial pillar in Brazil’s public utility landscape, particularly within São Paulo state. Born out of a necessity to tackle one of urban life’s most essential requirements – water supply and wastewater treatment – SABESP has transcended mere utility services to weave itself into the fabric of São Paulo's growth. The company, established in 1973, is akin to an engineer of urban sustainability, deftly managing a vast labyrinth of reservoirs, aqueducts, and sewage systems. It provides clean and safe water to millions, handling both its purification and distribution. Embedded in its operational core is an extensive infrastructure that not only facilitates the smooth transit of water but also ensures that wastewater is treated and returned to the environment in an ecologically responsible manner. SABESP generates revenue primarily through the provision of these water and wastewater services, with its financial health hinging on its ability to efficiently serve a sprawling population in an ever-expanding urban area. Customers, ranging from residential households to large industrial complexes, are billed based on their usage, creating a direct correlation between water consumption patterns and the company’s income streams. Over the years, SABESP has navigated Brazil's economic fluctuations, regulatory dynamics, and various environmental challenges, all while striving to expand its reach and enhance service quality. The company’s ability to maintain an intricate balance between meeting immediate urban demands and strategizing long-term infrastructure developments speaks to its pivotal role not only as a provider of essential services but also as a guardian of the region’s water resources.

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SBSP3 Intrinsic Value

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What is Intrinsic Value?

Economic Moat is a concept popularized by Warren Buffett to describe a company's durable competitive advantage. It represents the 'moat' that protects a company from competitors and helps it sustain profitability over the long term. Our analysis of the past 10 years showed that companies with a wide economic moat significantly outperformed the market, delivering +645% returns compared to +189% for the S&P 500.

Our research into Economic Moat performance spans the past 10 years and focuses on companies with a wide economic moat. For this analysis, we calculated the average stock price returns of these companies, comparing them to the performance of the S&P 500 index over the same period.

The results were compelling: wide moat stocks achieved a remarkable +645% average return, compared to +188% for the broader market. This difference highlights the long-term benefits of investing in businesses that can maintain their market position and pricing power over time.

Note: This research does not account for survivorship bias. Past performance is not indicative of future results.

Determining whether a company has an economic moat requires both a deep dive into financial metrics and a qualitative assessment of its competitive position. Our analysts conduct a rigorous evaluation that focuses on identifying structural advantages that enable a company to sustain profitability and defend its market share over the long term.

The process begins with an analysis of a company’s historical financial performance. We assess how consistently the company has generated returns above its cost of capital and whether those returns have been stable or improving. However, financial performance alone doesn’t reveal the full picture. To understand the sources of these advantages, we evaluate five key drivers of economic moats:

Network Effect: We analyze whether the value of a company’s product or service grows as its user base expands. Platforms like payment systems or marketplaces benefit from this self-reinforcing.

Switching Costs: We assess whether customers face significant costs or disruptions when switching to a competitor’s product or service. High switching costs create customer stickiness and provide pricing power.

Intangible Assets: Strong brands, patents, and regulatory licenses can protect a company’s market position by creating barriers for competitors or enabling premium pricing. For example, a well-recognized consumer brand may command higher customer loyalty and margins.

Efficient scale: Occurs when a market is optimally served by one or a few players, making it unprofitable for new entrants to compete. This typically happens in industries with high fixed costs or geographic constraints, such as utilities or pipelines.

Cost Advantage: Companies with structural cost advantages can produce goods or services at a lower cost than their competitors, enabling them to offer competitive pricing or maintain higher margins. These advantages often arise from economies of scale, superior supply chain management, or proprietary technology. Firms like Walmart leverage their massive scale to negotiate better terms with suppliers, allowing them to undercut competitors on price.

By examining these factors in combination with a company’s financial performance and market positioning, we classify each company into one of three categories:

This rigorous evaluation ensures that our moat ratings are both comprehensive and reliable, giving investors the tools they need to make well-informed, long-term decisions.

The AI Assistant may sometimes provide inaccurate information.

Make your own investment decisions or consult a licensed financial advisor.

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Companhia de Saneamento Basico do Estado de Sao Paulo SABESP
BOVESPA:SBSP3