Time To Worry? Analysts Just Downgraded Their Companhia de Saneamento Básico do Estado de São Paulo - SABESP (BVMF:SBSP3) Outlook

The latest analyst coverage could presage a bad day for Companhia de Saneamento Básico do Estado de São Paulo - SABESP (BVMF:SBSP3), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

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Following the latest downgrade, the current consensus, from the nine analysts covering Companhia de Saneamento Básico do Estado de São Paulo - SABESP, is for revenues of R$23b in 2025, which would reflect a stressful 36% reduction in Companhia de Saneamento Básico do Estado de São Paulo - SABESP's sales over the past 12 months. Before the latest update, the analysts were foreseeing R$28b of revenue in 2025. It looks like forecasts have become a fair bit less optimistic on Companhia de Saneamento Básico do Estado de São Paulo - SABESP, given the substantial drop in revenue estimates.

View our latest analysis for Companhia de Saneamento Básico do Estado de São Paulo - SABESP

We'd point out that there was no major changes to their price target of R$124, suggesting the latest estimates were not enough to shift their view on the value of the business.

One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 36% by the end of 2025. This indicates a significant reduction from annual growth of 13% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 0.5% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Companhia de Saneamento Básico do Estado de São Paulo - SABESP is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their revenue estimates for this year. They also expect company revenue to perform worse than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Companhia de Saneamento Básico do Estado de São Paulo - SABESP going forwards.

After a downgrade like this, it's pretty clear that previous forecasts were too optimistic. What's more, we've spotted several possible issues with Companhia de Saneamento Básico do Estado de São Paulo - SABESP's business, like concerns around earnings quality. Learn more, and discover the 1 other risk we've identified, for free on our platform here.

We also provide an overview of the Companhia de Saneamento Básico do Estado de São Paulo - SABESP Board and CEO remuneration and length of tenure at the company, and whether insiders have been buying the stock, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.