Aaron H. from Texas submitted a question regarding Companhia de Saneamento Basico do Estado de Sao Paulo (SBS) and whether it meets the criteria for an enterprising investor following Benjamin Graham’s investing style. After analysis we have concluded that it does not meet the criteria for the following reasons:
1) The current ratio is below the threshold of 1.5 which raises concerns of the firm’s ability to meet their short term debt obligations.
2) The firm is holding a great deal of debt on its books relative to assets. Currently their liabilities outpace their assets.
3) Net income has not been consistently positive over the past five years. In 2002 a loss in net income was reported.
4) The current share price is not less than 150% of the net tangible assets and thus is viewed as overpriced relative to the firm’s assets.
Based upon these negative aspects of the enterprising investor test we would not recommend purchasing this security. Please review our methods and make your own final investing judgment.
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