July 18, 2024
Top 10 Stock Rumo Strong Buy Recommendation
How to read the ranks
For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. The higher the rank, the better the stock performs than its peers. And, we do this for six investment strategies:
Value - shows how good of a value the stock is. Green is "inexpensive"; red is "expensive".
Growth - shows a company's growth potential. Green is "high growth" expected; red is "tough times ahead".
Safety - relates to the amount of debt a company has. Green is low debt level; red is high debt level.
Combined Financial - this isn't an average of the first three ranks but rather a consolidated view across several financial indicators. Green = good; red = tread carefully.
(NEW) Sentiment - quantifies professional analyst ratings and holdings as well as market pulse. Green = positive sentiment; red = skepticism (Only available to Premium Subscribers).
(NEW) 360° View - the ultimate rating with all financial and non-financial indicators.
Snapshot: Rumo – Top 10 Stock in Independent Boards in Growth Markets
Rumo is listed as a top 10 stock on July 18, 2024 in the market index Independent Boards Growth Markets because of its high performance in at least one of the Obermatt investment strategies. Three consolidated Obermatt Ranks are above-average. Only the Value Rank is below average. The investment rationale may be an investment in future growth, supported by professional market opinion. Based on the Obermatt 360° View of 93 (top 93% performer), Obermatt assesses an overall strong buy recommendation for Rumo on July 18, 2024.
Snapshot: Obermatt Ranks
| Country | Brazil |
| Industry | Railroads |
| Index | BOVESPA, Independent Boards Growth Markets |
| Size class | Large |
When Obermatt identifies the Top 10 stocks in a market, it’s based on a certain investment strategy. The best performing stocks usually aren’t the ones that everyone is talking about (those are often "over-priced" and have low Value ranks).
For each investment strategy, we provide you with more detailed analysis and our recommendation. You see the ranks of the top 10 stocks ranked by that particular investment strategy (360° View, Sentiment, Value, Growth, Safety and Combined Financial Performance).
360° View: Obermatt 360° View Rumo Strong Buy
| 360 METRICS | July 18, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 47 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 53 |
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| SENTIMENT | ||||||||
| SENTIMENT | 93 |
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| 360° VIEW | ||||||||
| 360° VIEW | 93 |
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ANALYSIS: With an Obermatt 360° View of 93 (better than 93% compared with alternatives) for 2024, overall professional sentiment and financial characteristics for the stock Rumo are very positive. The 360° View is based on consolidating four consolidated indicators, with all but one indicator above average for Rumo. The consolidated Growth Rank has a good rank of 95, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth, as well as stock returns. This means that growth is higher than for 95% of competitors in the same industry. The consolidated Safety Rank at 53 means that the company has a financing structure that is safer than 53% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. Finally, the consolidated Sentiment Rank has a good rank of 93, which means that professional investors are more optimistic about the stock than for 93% of alternative investment opportunities. But the consolidated Value Rank is less desirable at 47, meaning that the share price of Rumo is on the higher side compared with indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 53% of alternative stocks in the same industry. ...read more
RECOMMENDATION: With a consolidated 360° View of 93, Rumo is better positioned than 93% of all alternative stock investment opportunities based on the Obermatt Method. As three out of four consolidated Obermatt Ranks exhibit excellent performance, such as above-average growth (Growth Rank of 95), a safe financing structure (Safety Rank of 53), and positive professional market sentiment (Sentiment Rank of 93), it is a solid stock investment where growth may be the strongest driver of the investment rationale, also reflected by institutional investors. It is typical for growth companies to have low value, as is the case here. Investors are willing to pay more for companies that outperform their competitors. So the question is, how much more do you pay for the stock of Rumo compared with alternatives? You can use the following rule of thumb: The growth rank measures the growth momentum of the company (95% better than peers). The value rank could be the reverse reflection of that (5%). A Value Rank below that level may be assessed as expensive, a rank above that is still good value. Sometimes market sentiment just reflects the past, sometimes the reality. You pay more than the market average for this stock, but it may be worth it. ...read more
Sentiment Strategy: Professional Market Sentiment for Rumo very positive
ANALYSIS: With an Obermatt Sentiment Rank of 93 (better than 93% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Rumo is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for Rumo. Analyst Opinions are at a rank of 64 (better than 64% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 90, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in Rumo. The Professional Investors rank is 62, which means that currently, professional investors hold more stock in this company than in 62% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 71 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 71% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 93 (more positive than 93% compared with investment alternatives), Rumo has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean Rumo stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: Rumo Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 47 (worse than 53% compared with alternatives), Rumo shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Rumo. Price-to-Profit (also referred to as price-earnings, P/E) is 51 which means that the stock price compared with what market professionals expect for future profits is lower than for 51% of comparable companies, indicating a good value concerning Rumo's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 56, which means that the stock price is lower as regards to invested capital than for 56% of comparable investments. On the other hand, Price-to-Sales is less favorable than for 58% of alternatives (only 42% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than for 66% of comparable companies, making the stock more expensive compared with the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 47, is a hold recommendation based on Rumo's stock price compared with the company's operational size and dividend yields. This is a puzzling picture, because it means that profits are high while dividends are low. Since the stock price is low compared with invested capital but high concerning expected revenues, the company has more invested capital than peers for generating the same amount of revenue. Since profits are higher, it could be a "cash cow" situation (using the classic Boston Consulting Group or BCG matrix naming convention) where the company is on a downward trend, still living from the profits of past products. As the company pays low dividends, it may harbor the opinion that a turnaround is possible, and it rather invests the cash than distribute it to shareholders through dividends, thus sealing the company's fate early. Any investment optimism should only be a buy trigger once thorough research is completed. ...read more
Growth Strategy: Rumo Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 95 (better than 95% compared with alternatives) for 2024, Rumo shows one of the highest growth dynamics in its industry. Investors also speak of high momentum. The Growth Rank is based on consolidating four value indicators, with all but one indicator above average for Rumo. Sales Growth has a value of 59 which means that currently professionals expect the company to grow more than 59% of its competitors. Profit Growth with a value of 92 and Capital Growth with a rank of 91 means that currently, professionals expect the company to grow both profits and invested capital more than of its competitors. But Stock Returns has only a rank of 33, which means that stock returns have recently been below 67% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 95, is a buy recommendation for growth and momentum investors. Rumo has only one below-average growth indicator, the stock returns. This is probably the least reliable growth indicator, because it measures company and investor expectations at the same time. The three other growth indicators, which are all positive for Rumo, are more reliable measures of growth momentum. For this reason, the company seems to be on a good trajectory, unless you think the current period is not representative, because of unique events that will not be repeated in the future. ...read more
Safety Strategy: Rumo Debt Financing Safety above-average
| SAFETY METRICS | July 18, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 43 |
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| REFINANCING | ||||||||
| REFINANCING | 77 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 25 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 53 |
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ANALYSIS: With an Obermatt Safety Rank of 53 (better than 53% compared with alternatives), the company Rumo has financing practices on the safer side, which mean that their overall debt burden is lower than average. This doesn't mean that the business of Rumo is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with just one indicator above average for Rumo and the other two below average. Refinancing is at 77, meaning the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 77% of its competitors. But Leverage is high with a rank of 43, meaning the company has an above-average debt-to-equity ratio. It has more debt than 57% of its competitors. Liquidity is also on the riskier side with a rank of 25, meaning the company generates less profit to service its debt than 75% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 53 (better than 53% compared with alternatives), Rumo has a financing structure that is safer than that of its competitors. A good Refinancing Rank means that the problems of the company may not be around the corner. But high Leverage is only good if things go well, and low Liquidity is a signal for caution. The financing signals for Rumo are on the riskier side, requiring the company's future to be on the safer side. Investors may want to look at Growth and Sentiment ranks before making an investment decision. ...read more
Combined financial peformance: Rumo Top Financial Performance
| COMBINED PERFORMANCE | July 18, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 47 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 25 |
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| COMBINED | ||||||||
| COMBINED | 86 |
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ANALYSIS: With an Obermatt Combined Rank of 86 (better than 86% compared with investment alternatives), Rumo (Railroads, Brazil) shares have much better financial characteristics than comparable stocks. Shares of Rumo are low in value (priced high) with a consolidated Value Rank of 47 (worse than 53% of alternatives). But they show above-average growth (Growth Rank of 95) and are safely financed (Safety Rank of 53, which means below-average debt burdens). ...read more
RECOMMENDATION: A Combined Rank of 86, is a strong buy recommendation based on Rumo's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company Rumo exhibits low value (Obermatt Value Rank of 47), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 95). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 53) are a double-edged sword: if the company continues growing, low debt limits shareholder returns. But if the company increases its debt, it will also increase risk. In other words, this is an investment on the safer side, despite the above-average price (low value). ...read more
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