April 11, 2024
Top 10 Stock Covestro 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: Covestro – Top 10 Stock in Deutscher Aktienindex DAX 40
Covestro is listed as a top 10 stock on April 11, 2024 in the market index DAX 40 because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is growing above average 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° View of 64 (high 64% performer), Obermatt assesses an overall buy recommendation for Covestro on April 11, 2024.
Snapshot: Obermatt Ranks
| Country | Germany |
| Industry | Specialty Chemicals |
| Index | CDAX, DAX 40, Low Emissions, Energy Efficient, Diversity Europe |
| Size class | XX-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 Covestro Buy
| 360 METRICS | April 11, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 24 |
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| GROWTH | ||||||||
| GROWTH | 100 |
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| SAFETY | ||||||||
| SAFETY | 23 |
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| SENTIMENT | ||||||||
| SENTIMENT | 65 |
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| 360° VIEW | ||||||||
| 360° VIEW | 64 |
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ANALYSIS: With an Obermatt 360° View of 64 (better than 64% compared with alternatives), overall professional sentiment and financial characteristics for the stock Covestro are above average. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for Covestro. The consolidated Growth Rank has a good rank of 100, 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 100% of competitors in the same industry. The consolidated Sentiment Rank also has a good rank of 65, which means that professional investors are more optimistic about the stock than for 65% of alternative investment opportunities. But the consolidated Value Rank has a less desirable rank of 24, which means that the share price of Covestro is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 76% of alternative stocks in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 23, which means that the company has a financing structure that is riskier than those of 77% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. ...read more
RECOMMENDATION: With a consolidated 360° View of 64, Covestro is better positioned than 64% of all alternative stock investment opportunities based on the Obermatt Method. Only half of the consolidated Obermatt Ranks exhibit excellent performance, so one needs to take a close look. Growth is above-average (Growth Rank of 100), and professional market sentiment is positive (Sentiment Rank of 65), but value and safety are below average. The Safety Rank is the least significant of the four consolidated ranks, because it only reflects financing practices. In the case of high growth, aggressive financing is a good thing. So the question is: How to assess below-average value against above-average growth and sentiment? Growth may be the strongest driver of the investment rationale in this case, which is reflected in institutional investors' opinions. 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 do you sacrifice value for growth? You can use the following rule of thumb: If you take 100 minus the growth rank, you arrive at a possibly minimum level for the value 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 if the growth rank is above 60. Sometimes market sentiment just extrapolates the past, but sometimes it reflects 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 Covestro positive
ANALYSIS: With an Obermatt Sentiment Rank of 65 (better than 65% compared with alternatives), overall professional sentiment and engagement for the stock Covestro is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Covestro. Analyst Opinions are at a rank of 61 (better than 61% of alternative investments), which means that currently, stock research analysts tend to recommend a stock investment in the company. In addition, Analyst Opinions Change has a rank of 54, which means that currently, stock research experts are getting even more optimistic. Obermatt Market Pulse further supports this with a rank of 62, which means that the current professional news and professional social networks are generally positive when discussing this company (more positive news than for 62% of competitors). But there are few stock holdings by institutional investors. The Professional Investors rank is low at 48, which means that currently, professional investors hold less stock in this company than in 52% of alternative investment opportunities. Pros tend to invest in other companies. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 65 (more positive than 65% compared with investment alternatives), Covestro has a reputation among professional investors that is above-average compared with that of its competitors. Not having too many professionals invested in Covestro may be less of an issue, especially if the stock is from a smaller company where professionals typically invest less. It is natural for professional investors to focus on large and extra-large companies, as they provide more safety. Smaller companies attract fewer professionals in the shareholder community. Overall, the signals from the professionals are still quite favorable for investments in Covestro. ...read more
Value Strategy: Covestro Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 24 (worse than 76% compared with alternatives), Covestro shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, where half the indicators are below and half above average for Covestro. Price-to-Sales (P/S) is 65, which means that the stock price compared with what market professionals expect for future sales is lower than for 65% of comparable companies, indicating a good value concerning Covestro's revenue size. The same is valid for the Price-to-Book Capital ratio (also referred to as market-to-book ratio), which is more favorable than for 54% of alternatives (46% of peers have a higher ratio). But expected dividend yields with a Dividend Yield rank of 32 are lower than average (dividends are expected to be lower than 68% of other stocks) while the Price to Profit ratio (or Price to Earnings (P/E) ratio) is higher than average with a Price-to-Profit Rank of 5, making the stock more expensive compared with the company's expected profit levels. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 24, is a sell recommendation based on Covestro's stock price compared with the company's operational size and dividend yields. Low profits and low dividends as seen here for Covestro may indicate a restructuring phase. This could be transitory, making the company a good value when profits recover and dividends return to higher levels. If the stock price is compared with the size indicators for revenue and invested capital, it is on the lower side, making this stock a good value investment (apart from current profit and dividend expectations). ...read more
Growth Strategy: Covestro Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 100 (better than 100% compared with alternatives) for 2024, Covestro 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 Covestro. Profit Growth has a rank of 89 which means that currently professionals expect the company to grow its profits more than 89% of its competitors. The same is valid for capital growth and stock returns. Capital Growth has a rank of 88, and Stock Returns has a rank of 99 which means that the stock returns have recently been above 99% of alternative investments. Only revenue growth is low with a Sales Growth has a rank of 45 (55% of its competitors are better). ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 100, is a buy recommendation for growth and momentum investors. The many positive growth indicators indicate a positive growth momentum with only low revenue growth. That can also be attributed to divestments or the sale of unprofitable businesses. If that is the reason, overall growth is well on track to making this stock attractive for growth investors. ...read more
Safety Strategy: Covestro Debt Financing Safety risky
| SAFETY METRICS | April 11, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 51 |
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| REFINANCING | ||||||||
| REFINANCING | 52 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 16 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 23 |
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ANALYSIS: With an Obermatt Safety Rank of 23 (better than 23% compared with alternatives), the company Covestro 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 Covestro 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 where two out of three are above average for Covestro.Leverage is at 51, meaning the company has a below-average debt-to-equity ratio. It has less debt than 51% of its competitors.Refinancing is at a rank of 52, meaning that the portion of the debt that is about to be refinanced is below average. It has less debt in the refinancing stage than 52% of its competitors. Liquidity is at 16, meaning that the company generates less profit to service its debt than 84% of its competitors. This indicates that the company is on the riskier side regarding debt service. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 23 (worse than 77% compared with alternatives), Covestro has a financing structure that is significantly riskier than that of its competitors. Low leverage and low refinancing risk mean a safer financing situation. However, low liquidity means that current company cash flows are low in relation to the level of debt. This is a sign of caution in case it is expected for profits to remain low. ...read more
Combined financial peformance: Covestro Below-Average Financial Performance
| COMBINED PERFORMANCE | April 11, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 24 |
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| GROWTH | ||||||||
| GROWTH | 100 |
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| SAFETY | ||||||||
| SAFETY | 16 |
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| COMBINED | ||||||||
| COMBINED | 48 |
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ANALYSIS: With an Obermatt Combined Rank of 48 (worse than 52% compared with investment alternatives), Covestro (Specialty Chemicals, Germany) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Covestro are low in value (priced high) with a consolidated Value Rank of 24 (worse than 76% of alternatives), and are riskily financed (Safety Rank of 23, which means above-average debt burdens) but show above-average growth (Growth Rank of 100). ...read more
RECOMMENDATION: A Combined Rank of 48, is a hold recommendation based on Covestro's financial characteristics. As the company Covestro shows low value with an Obermatt Value Rank of 24 (76% 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 100% of comparable companies (Obermatt Growth Rank is 100). This is a typical case. Companies with above average growth tend to cost more than stocks with slower growth expectations. If this is a high-growth company, the low Obermatt Safety Rank of 23 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 Covestro, even a low-value company (in terms of its key financial indicators) can be a good investment. ...read more
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