May 11, 2023
Top 10 Stock Aristocrat 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: Aristocrat – Top 10 Stock in Australian Securities Exchange Index ASX 100
Aristocrat is listed as a top 10 stock on May 11, 2023 in the market index ASX 100 because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is safely financed, and professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° Rank of 59 (high 59% performer), Obermatt assesses an overall buy recommendation for Aristocrat on May 11, 2023.
Snapshot: Obermatt Ranks
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° Assessment Aristocrat Buy
| 360 METRICS | May 11, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 37 |
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| GROWTH | ||||||||
| GROWTH | 25 |
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| SAFETY | ||||||||
| SAFETY | 62 |
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| SENTIMENT | ||||||||
| SENTIMENT | 96 |
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| 360° VIEW | ||||||||
| 360° VIEW | 59 |
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ANALYSIS: With an Obermatt 360° Rank of 59 (better than 59% compared with alternatives), overall professional sentiment and engagement for the stock Aristocrat are above average. The 360° Rank is based on consolidating four consolidated indicators, with half below and half above average for Aristocrat. The consolidated Sentiment Rank has a good rank of 96, which means that professional investors are more optimistic about the stock than for 96% of alternative investment opportunities. It also rates well regarding its financing structure, wtih the consolidated Safety Rank at 62 or better than 62% of its peers when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the stock is expensive and expects low growth. The consolidated Value Rank is only 37, meaning that the share price of Aristocrat is on the high side, compared with indicators such as revenues, profits, and invested capital. The company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth,and stock returns, with its Growth Rank at 25. ...read more
RECOMMENDATION: With a 360° Rank of 59, Aristocrat is better than 59% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, namely the positive professional market sentiment (Sentiment Rank of 96) and safe financing practices (Safety Rank of 62), the case for investing in this stock needs further thought. The Value and the Safety Ranks are below average. The Safety Rank is the least critical of the four consolidated ranks, because it only reflects financing practices. So the question is: How to assess below-average value against above-average sentiment? This may be a case where growth is in the future, not yet reflected in current performance. Companies that might fall into this category are those with intellectual property, such as technology and pharmaceutical companies. In early phases, they are expensive relative to their size and have a lot of capital on their books, as is the case here. Inventors expect a better future and are willing to pay a higher price than is warranted by the current company size. These higher prices drive stock price value down in the short term. In this case, future growth may be the strongest driver of the investment case, reflected by institutional investors' opinions. With a weak Value Rank, the question is how much to sacrifice value at the cost of positive sentiment. Sometimes market sentiment is just hype, but sometimes it is right. You pay more than market-average for this stock, but it may be worth it, if the future of Aristocraṭ is bright. Prudent investors may only want to invest a smaller portion of their wealth in such situations. Young investors can carry more risk but should still thrive for sufficient diversification. ...read more
Sentiment Strategy: Professional Market Sentiment for Aristocrat very positive
ANALYSIS: With an Obermatt Sentiment Rank of 96 (better than 96% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock Aristocrat is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for Aristocrat. Analyst Opinions are at a rank of 80 (better than 80% 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 56, 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 Aristocrat. The Professional Investors rank is 83, which means that currently, professional investors hold more stock in this company than in 83% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 78 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 78% of competitors). ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 96 (more positive than 96% compared with investment alternatives), Aristocrat 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 Aristocrat 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: Aristocrat Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 37 (worse than 63% compared with alternatives), Aristocrat 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 Aristocrat. Price-to-Profit (also referred to as price-earnings, P/E) has a value of 64 which means that the stock price compared with what market professionals expect for future profits is lower than 64% of comparable companies, indicating a good value concerning Aristocrat's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with an Obermatt Price-to-Book Rank of 28, which means that the stock price is lower compared with invested capital than for 28% of comparable investments. On the other hand, Price-to-Sales is less favorable than 83% of alternatives (only 17% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than 49% 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 37, is a HOLD recommendation based on Aristocrat'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 in respect to expected revenues, it means that 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 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 pay it out to shareholders, sealing the company's fate early. This needs to be investigated, and the company's optimism verified before deciding to buy the stock. ...read more
Growth Strategy: Aristocrat Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 25 (better than 25% compared with alternatives), Aristocrat shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Aristocrat. Profit Growth has a rank of 51, which means that currently professionals expect the company to grow its profits more than 51% of its competitors. This is a good sign for shareholders, which is confirmed by an above-average Stock Returns rank of 61 (above 61% of alternative investments). But Sales Growth has a below the median rank of 14, which means that, currently, professionals expect the company to grow less than 86% of its competitors, and Capital Growth also has a lower rank of 34. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 25, is a HOLD recommendation for growth and momentum investors. Because revenues and invested capital are the more solid growth indicators, the positive development on the profit side is less relevant. It may have been caused by cost-cutting, which may be a negative growth indicator. Finally, the above-average stock returns recently are a thing of the past and not a good indicator of future returns. Investors should be confident that the cost-cutting initiative leading to higher profits is to benefit the company's future. If not, there is little growth momentum, and investment is only advisable if the Value Ranks suggest a good investment timing for Aristocrat. ...read more
Safety Strategy: Aristocrat Debt Financing Safety above-average
| SAFETY METRICS | May 11, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 48 |
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| REFINANCING | ||||||||
| REFINANCING | 61 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 61 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 62 |
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ANALYSIS: With an Obermatt Safety Rank of 62 (better than 62% compared with alternatives), the company Aristocrat 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 Aristocrat 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 two out of three indicators above-average for Aristocrat. Refinancing is at 61, meaning the portion of the debt that is about to be refinanced is below average. It has less debt in the refinancing stage than 61% of its competitors. Liquidity is also good at 61, meaning the company generates more profit to service its debt than 61% of its competitors. This indicates that the company is safer when it comes to debt service. However, Leverage is rather large at 48, which means the company has an above-average debt-to-equity ratio. It has more debt than 52% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 62 (better than 62% compared with alternatives), Aristocrat has a financing structure that is safer than that of its competitors. This is not bad if things go well. The higher debt level means better returns to shareholders if things go well. Many top-performing companies operate with higher debt levels, and Aristocrat could be in that group. But if you expect the environment to turn rougher, the higher leverage could become a problem. The same is valid if you expect interest rates to rise. That could squeeze shareholder returns, which so far have benefitted from better conditions. ...read more
Combined financial peformance: Aristocrat Below-Average Financial Performance
| COMBINED PERFORMANCE | May 11, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 37 |
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| GROWTH | ||||||||
| GROWTH | 25 |
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| SAFETY | ||||||||
| SAFETY | 61 |
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| COMBINED | ||||||||
| COMBINED | 28 |
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ANALYSIS: With an Obermatt Combined Rank of 28 (worse than 72% compared with investment alternatives), Aristocrat (Casinos & Gaming, Australia) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Aristocrat are low in value (priced high) with a consolidated Obermatt Value Rank of 37 (worse than 63% of alternatives) and show below-average growth (Growth Rank of 25) but are safely financed (Safety Rank of 62), which means low debt burdens. ...read more
RECOMMENDATION: An Obermatt Combined Rank of 28, is a hold recommendation based on Aristocrat's financial characteristics. As the company Aristocrat's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 37) and low growth (Obermatt Growth Rank of 25), it is a somewhat questionable stock investment, where the risk of paying too much for the shares is significant, unless the company has an exceptionally bright future. In this case, good financing practices (Obermatt Safety Rank of 62) are a positive sign, because it may allow the company to weather challenging times until the hoped-for cash flows materialize. This may be true for high-tech or biotechnology companies with enough cash to sustain prolonged business development. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and unattractive today. In such cases, the Obermatt Method has limited value, as it is based on facts we can observe today. If the facts are all in the future, stock investing becomes guesswork, and this should only be used in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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