May 11, 2023
Top 10 Stock Challenger Sell 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: Challenger – Top 10 Stock in Australian Securities Exchange Index ASX 100
Challenger 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. Only one consolidated Obermatt Rank is above-average. The company is growing above average, but all other facts speak against a stock purchase, especially the low market sentiment by professional investors. Based on the Obermatt 360° Rank of 8 (8% performer), Obermatt issues an overall sell recommendation for Challenger 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 Challenger Sell
| 360 METRICS | May 11, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 30 |
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| GROWTH | ||||||||
| GROWTH | 89 |
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| SAFETY | ||||||||
| SAFETY | 7 |
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| SENTIMENT | ||||||||
| SENTIMENT | 8 |
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| 360° VIEW | ||||||||
| 360° VIEW | 8 |
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ANALYSIS: With an Obermatt 360° Rank of 8 (better than 8% compared with alternatives), overall professional sentiment and engagement for the stock Challenger are critical, mostly below average. The 360° Rank is based on consolidating four consolidated indicators, with three out of four indicators below average for Challenger. The consolidated Growth Rank has a good rank of 89, 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. It ranks higher than 89% of competitors in the same industry. The other indicators are below average, namely the Value, Safety, and Sentiment Ranks.The Value Rank at 30 means that the share price of Challenger is on the high side compared with its peer regarding revenues, profits, and invested capital. The stock price is higher than 70% of alternative stocks in the same industry. The consolidated Safety Rank has a riskier rank of 7, which means that the company has a riskier financing structure than 93% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. The consolidated Sentiment Rank also has a low rank of 8, indicating professional investors are more pessimistic about the stock than for 92% of alternative investment opportunities. ...read more
RECOMMENDATION: With a 360° Rank of 8, Challenger is worse than 92% of all alternative stock investment opportunities based on the Obermatt Method. This means that Challenger shares are on the riskier side for investors. As only one of the consolidated Obermatt Ranks exhibits excellent performance, namely the above-average growth (Growth Rank of 89), it is a riskier stock investment proposition. Aside from the critical professional market sentiment (Sentiment Rank of 8), the company is rather risky when it comes to financing (Safety Rank of 7). The negative market view on Challenger may be due to the high stock price (low value). A growth company like this may get too expensive at one point in time. If too many investors are desperate to join the party, they may drive stock prices above reasonable levels. While it is typical for growth companies to have low value, because investors are willing to pay more for companies that are expected to have high growth, the crucial question is: how much more do you pay for the stock of Challenger compared with alternatives? You can use the following rule of thumb: The value rank shouldn’t be lower than one minus the growth rank. For example, if the growth rank is at 75, and the value rank is at 5, you should tread carefully. If the value rank is at 40, it still might be a good value (even though it is lower than 50). As market sentiment is critical, you should be careful with paying more than market-average for this stock and conduct further research into the company's future growth potential. ...read more
Sentiment Strategy: Professional Market Sentiment for Challenger negative
ANALYSIS: With an Obermatt Sentiment Rank of 8 (better than 8% compared with alternatives), overall professional sentiment and engagement for the stock Challenger is critical, mostly below average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Challenger. Analyst Opinions are at a rank of 28 (worse than 72% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. Worse, Analyst Opinions Change has a rank of 18 which means that stock research experts are getting even more pessimistic. It doesn't end with the analysts. Market Pulse is also low with a rank of 46, which means that the current professional news and professional social networks are on the negative side when discussing this company (more negative news than for 54% of competitors). No wonder, the Professional Investors rank is only 28, which means that professional investors hold less stock in this company than in 72% of alternative investment opportunities. Pros tend to stay away from Challenger, which may be due to a small company size but just as likely because of its relatively low Sentiment Rank. ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 8 (less encouraging than 92% compared with investment alternatives), Challenger has a reputation among professional investors that is far below that of its competitors. Investors should be careful with this stock right now. Further research is required if an investment is desired, because the facts found in the professional community are all negative. ...read more
Value Strategy: Challenger Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 30 (worse than 70% compared with alternatives), Challenger shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with three out of four indicators below average for Challenger. Only the metric dividend yield has an above-average rank, reflecting that dividend practices are expected to be higher than 67% of comparable companies, making the stock an attractive buy for dividend investors. However, dividend investors may get disappointed because all other critical financial indicators are below the market median: Price-to-Sales has a value of 18 which means that the stock price compared with what market professionals expect for future profits is higher than 82% of comparable companies, indicating a low value concerning Challenger's sales levels. The same is valid for Price-to-Profit (also referred to as price-earnings, P/E) with a rank of 40 which means that the stock price compared with what market professionals expect for future profit levels is higher than 60% of comparable companies. In addition, Price-to-Book Capital (also referred to as market-to-book ratio) with an Obermatt Price-to-Book Rank of 46 is also low. Compared with invested capital, the stock price is higher than for 54% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 30, is a HOLD recommendation based on Challenger's stock price compared with the company's operational size and dividend yields. Should dividend investors pick Challenger? The company-reported financials speak against it. The company is expensive compared with revenue and invested capital levels, two reliable company size indicators. In addition, it currently has a low level of profits. How can future dividends be paid in the case that profits remain low? Dividend investors should choose Challenger only if they reasonably expect the low current profit levels to be transitory. ...read more
Growth Strategy: Challenger Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 89 (better than 89% compared with alternatives) for 2023, Challenger 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 Challenger. Sales Growth has a value of 70 which means that currently professionals expect the company to grow more than 70% of its competitors. Profit Growth with a value of 52 and Capital Growth with a rank of 100 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 23, which means that stock returns have recently been below 77% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 89, is a BUY recommendation for growth and momentum investors. Challenger 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 Challenger, 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: Challenger Debt Financing Safety risky
| SAFETY METRICS | May 11, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 36 |
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| REFINANCING | ||||||||
| REFINANCING | 63 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 4 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 7 |
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ANALYSIS: With an Obermatt Safety Rank of 7 (better than 7% compared with alternatives), the company Challenger has much riskier financing practices than comparable other companies, which means that their overall debt burden is significantly above the industry average. This doesn't mean that the business of Challenger is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with just one indicator above average for Challenger and the other two below average. Refinancing is at 63, meaning the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 63% of its competitors. But Leverage is high with a rank of 36, meaning the company has an above-average debt-to-equity ratio. It has more debt than 64% of its competitors. Liquidity is also on the riskier side with a rank of 4, meaning the company generates less profit to service its debt than 96% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 7 (worse than 93% compared with alternatives), Challenger has a financing structure that is significantly riskier 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 Challenger 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 a financial decision. ...read more
Combined financial peformance: Challenger Below-Average Financial Performance
| COMBINED PERFORMANCE | May 11, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 30 |
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| GROWTH | ||||||||
| GROWTH | 89 |
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| SAFETY | ||||||||
| SAFETY | 4 |
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| COMBINED | ||||||||
| COMBINED | 31 |
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ANALYSIS: With an Obermatt Combined Rank of 31 (worse than 69% compared with investment alternatives), Challenger (Other Financial Services, Australia) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Challenger are low in value (priced high) with a consolidated Obermatt Value Rank of 30 (worse than 70% of alternatives), and are riskily financed (Safety Rank of 7, which means above-average debt burdens) but show above-average growth (Growth Rank of 89). ...read more
RECOMMENDATION: An Obermatt Combined Rank of 31, is a hold recommendation based on Challenger's financial characteristics. As the company Challenger shows low value with an Obermatt Value Rank of 30 (70% of comparable investments are less expensive), investors should look at the other ranks. In this case, growth is expected to be above-average, better than 89% of comparable companies (Obermatt Growth Rank is 89). This is a typical case. Companies with above average growth tend to cost more than the sluggish variety. If this is a high-growth company, the low Obermatt Safety Rank of 7 is a good sign. The more debt a well-performing company has, the higher the returns to shareholders. However, if growth turns negative or interest rates increase, high debt may become a burden. If you believe the future is bright for Challenger, even a low-value company (in terms of its key financial indicators) can be a good investment. ...read more
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