March 7, 2024
Top 10 Stock Challenger 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: Challenger – Top 10 Stock in Australian Securities Exchange Index ASX 200
Challenger is listed as a top 10 stock on March 07, 2024 in the market index ASX 200 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 the 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° View of 81 (top 81% performer), Obermatt assesses an overall strong buy recommendation for Challenger on March 07, 2024.
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° View Challenger Strong Buy
| 360 METRICS | March 7, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 37 |
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| GROWTH | ||||||||
| GROWTH | 29 |
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| SAFETY | ||||||||
| SAFETY | 78 |
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| SENTIMENT | ||||||||
| SENTIMENT | 94 |
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| 360° VIEW | ||||||||
| 360° VIEW | 81 |
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ANALYSIS: With an Obermatt 360° View of 81 (better than 81% compared with alternatives) for 2024, overall professional sentiment and financial characteristics for the stock Challenger are very positive. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for Challenger. The consolidated Sentiment Rank has a good rank of 94, which means that professional investors are more optimistic about the stock than for 94% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 78 or better than 78% 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 Challenger 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 29. ...read more
RECOMMENDATION: With a consolidated 360° View of 81, Challenger is better positioned than 81% 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 94) and safe financing practices (Safety Rank of 78), 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. Investors 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 Challengeṛ 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 Challenger very positive
ANALYSIS: With an Obermatt Sentiment Rank of 94 (better than 94% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Challenger is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Challenger. Analyst Opinions are at a rank of 36 (worse than 64% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. But they are changing their opinions! Analyst Opinions Change has a rank of 95, which indicates a shift in stock research experts opinions for the better. In other words, they are getting more optimistic about stock investments in Challenger. Even better, the Professional Investors rank is 92, meaning that professional investors hold more stock in this company than in 92% of alternative investment opportunities. Pros tend to favor investing in this company. Furthermore, Market Pulse has a rank of 71, which means that the current professional news and professional social networks are upbeat when discussing this company (more positive news than for 71% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 94 (more positive than 94% compared with investment alternatives), Challenger has a reputation among professional investors that is significantly higher than that of its competitors. While analysts are still critical of the company, some are changing their minds. In addition, the professional news channels are optimistic, and many institutional investors have already bought stock in the company. These are encouraging signals, despite the still lower level of analyst recommendations. They may be due to a problematic past, and about to change. The positive sentiment signals are stronger than the negative. ...read more
Value Strategy: Challenger Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 37 (worse than 63% 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 above average for Challenger. Price-to-Profit (also referred to as price to earnings, P/E ratio) is 60 which means that the stock price compared with what market professionals expect for future profits is lower than for 60% of comparable companies, indicating a good value concerning Challenger's profit levels. The same is valid for the expected Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 51, and for Dividend Yield with a Dividend Yield Rank of 60. But, compared with other companies in the same industry, the stock price is higher than average as regards expected revenues; only 84% of all competitors have an even higher stock price as regards to sales revenues (a Price-to-Sales Rank of 16). Profits, the level of invested capital, and dividend policy suggest that this stock is attractively priced. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 37, is a hold recommendation based on Challenger's stock price compared with the company's operational size and dividend yields. Since it is on the expensive side for Price-to-Sales, it may mean that Challenger has pricing power in its distribution market because it can charge higher prices than its competitors. If this is the case, all four value indicators are positive signals for purchasing Challenger shares. ...read more
Growth Strategy: Challenger Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 29 (better than 29% compared with alternatives), Challenger 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 three out of four indicators below-average for Challenger. While Sales Growth ranks at 68, professionals currently expect the company to grow more than 68% of its competitors, while all other growth ranks are below the market median. Profit Growth has a rank of 36, which means that, currently, professionals expect the company to grow its profits less than 64% of its competitors, and Capital Growth has a low rank of 39. Historic stock returns were also below average with a current Stock Returns rank of 20 which means that the stock returns have recently been below 80% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 29, is a hold recommendation for growth and momentum investors. If revenues are expected to increase, but all other growth indicators are negative, the company may be investing in future growth through means not visible in the balance sheet and thus not reflected in capital growth. The fact that Stock Returns have been below market doesn't mean that much, as it may be due to overly optimistic investor behavior in the past, which has been corrected to a more reasonable level recently. If that were the case, a positive Value Rank would be a reason to invest because the company is still expected to grow, while stock prices are now at a more reasonable level. ...read more
Safety Strategy: Challenger Debt Financing Safety very solid
| SAFETY METRICS | March 7, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 39 |
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| REFINANCING | ||||||||
| REFINANCING | 67 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 80 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 78 |
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ANALYSIS: With an Obermatt Safety Rank of 78 (better than 78% compared with alternatives) for 2024, the company Challenger has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Challenger 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 Challenger. Refinancing is at 67, meaning the portion of the debt that is about to be refinanced is below average. It has less debt in the refinancing stage than 67% of its competitors. Liquidity is also good at 80, meaning the company generates more profit to service its debt than 80% of its competitors. This indicates that the company is safer when it comes to debt service. However, Leverage is rather large at 39, which means the company has an above-average debt-to-equity ratio. It has more debt than 61% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 78 (better than 78% compared with alternatives), Challenger has a financing structure that is significantly 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 Challenger 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: Challenger Below-Average Financial Performance
| COMBINED PERFORMANCE | March 7, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 37 |
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| GROWTH | ||||||||
| GROWTH | 29 |
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| SAFETY | ||||||||
| SAFETY | 80 |
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| COMBINED | ||||||||
| COMBINED | 43 |
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ANALYSIS: With an Obermatt Combined Rank of 43 (worse than 57% 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 Value Rank of 37 (worse than 63% of alternatives) and show below-average growth (Growth Rank of 29) but are safely financed (Safety Rank of 78), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 43, is a hold recommendation based on Challenger's financial characteristics. As the company Challenger's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 37) and low growth (Obermatt Growth Rank of 29), 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 78) 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 lie all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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