August 22, 2024
Top 10 Stock Denso Hold 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: Denso – Top 10 Stock in Tokyo Stock Exchange TOPIX 100
Denso is listed as a top 10 stock on August 22, 2024 in the market index TOPIX 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° View of 45 (45% performer), Obermatt assesses an overall hold recommendation for Denso on August 22, 2024.
Snapshot: Obermatt Ranks
| Country | Japan |
| Industry | Auto Parts & Equipment |
| Index | TOPIX 100, Recycling, Nikkei 225 |
| 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 Denso Hold
| 360 METRICS | August 22, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 9 |
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| GROWTH | ||||||||
| GROWTH | 91 |
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| SAFETY | ||||||||
| SAFETY | 49 |
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| SENTIMENT | ||||||||
| SENTIMENT | 43 |
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| 360° VIEW | ||||||||
| 360° VIEW | 45 |
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ANALYSIS: With an Obermatt 360° View of 45 (better than 45% compared with alternatives), overall professional sentiment and financial characteristics for the stock Denso are below the industry average. The 360° View is based on consolidating four consolidated indicators, with three out of four indicators below average for Denso. The consolidated Growth Rank has a good rank of 91, 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 91% of competitors in the same industry. The other indicators are below average, namely the Value, Safety, and Sentiment Ranks.The Value Rank at 9 means that the share price of Denso is on the high side compared with its peers regarding revenues, profits, and invested capital. The stock price is higher than for 91% of alternative stocks in the same industry. The consolidated Safety Rank has a riskier rank of 49, which means that the company has a riskier financing structure than 51% 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 43, indicating professional investors are more pessimistic about the stock than for 57% of alternative investment opportunities. ...read more
RECOMMENDATION: With a consolidated 360° View of 45, Denso is worse than 55% of all alternative stock investment opportunities based on the Obermatt Method. As only one of the consolidated Obermatt Ranks exhibits excellent performance, namely the above-average growth (Growth Rank of 91), it is a riskier stock investment proposition. Aside from the critical professional market sentiment (Sentiment Rank of 43), the company is rather risky when it comes to financing (Safety Rank of 49). The negative market view on Denso 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 Denso 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 Denso only reserved
ANALYSIS: With an Obermatt Sentiment Rank of 43 (better than 43% compared with alternatives), overall professional sentiment and engagement for the stock Denso is below industry average. The Sentiment Rank is based on consolidating four sentiment indicators, with three out of four metrics below average for Denso. Analyst Opinions are at a rank of 72 (better than 72% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. This is a good sign, were it not for Analyst Opinions Change with a low rank of 44, which means that currently, stock research experts are changing their opinions for the worse. In other words, they are getting more critical of a stock investment in Denso. The Professional Investors rank is also low at 35, meaning that professional investors hold less stock in this company than in 65% of alternative investment opportunities. Pros tend to invest in other companies. Even worse, Market Pulse has a low rank of 28, which means that the current professional news and professional social networks are critical of this company (more negative news than for 72% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 43 (less encouraging than 57% compared with investment alternatives), Denso has a reputation among professional investors that is below that of its competitors. There are several negative sentiment signals, with only the Analyst Opinions Rank above average. This could be a stock with a long reputation for being positive but where things are worsening. Most analysts may not see it yet, but some have, and the professionals are already quite pessimistic. Proceed with caution when investing in this stock. ...read more
Value Strategy: Denso Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 9 (worse than 91% compared with alternatives), Denso shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with all four indicators below average for Denso. Price-to-Sales is 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 Denso's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Price-to-Book Rank of 31, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of Denso. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 31 and Dividend Yield, which is lower than 72% of comparable companies, also make the stock more expensive compared with investment alternatives. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 9, is a sell recommendation based on Denso's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for Denso? One reason may be that the company is simply too popular. If enough people want a particular stock, its price can exceed reasonable levels. This is often the case for companies offering new and exciting products and everybody wants a piece of the action. Should you pay a lot for a hot stock such as Denso? It's risky, and even if the stock price continues to grow because of popular demand, it may return to more typical lower levels later. And that return can be sudden and quick, making it impossible for retail investors to exit on time. Sometimes, high prices are deserved. This is the case when it is justified to believe that the company will dominate a market with high profit margins. It has happened in the past for many technology companies and indeed for commercially successful pharmaceutical discoveries. Sometimes they last, sometimes, they get eaten alive. Denso may be such a type of stock. That would mean, retail investors should be careful, only considering investing a small part of their wealth in this exciting category and always being ready to lose more than half, if not all of the investment. ...read more
Growth Strategy: Denso Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 91 (better than 91% compared with alternatives) for 2024, Denso 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 Denso. Sales Growth has a value of 69 which means that currently professionals expect the company to grow more than 69% of its competitors. Profit Growth with a value of 85 and Capital Growth with a rank of 78 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 43, which means that stock returns have recently been below 57% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 91, is a buy recommendation for growth and momentum investors. Denso 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 Denso, 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: Denso Debt Financing Safety below-average
| SAFETY METRICS | August 22, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 70 |
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| REFINANCING | ||||||||
| REFINANCING | 31 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 64 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 49 |
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ANALYSIS: With an Obermatt Safety Rank of 49 (better than 49% compared with alternatives), the company Denso has financing practices on the riskier side, which means that their overall debt burden is above the industry average. This doesn't mean that the business of Denso 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 two out of three indicators above average for Denso. Leverage is at a rank of 70, meaning the company has a below-average debt-to-equity ratio. It has less debt than 70% of its competitors. Liquidity is also good at a rank of 64, meaning the company generates more profit to service its debt than 64% of its competitors. This indicates that the company is on the safer side when it comes to debt service. But Refinancing is lower at a rank of 31, which means that the portion of the debt that is about to be refinanced is above-average. It has more debt in the refinancing stage than 69% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 49 (worse than 51% compared with alternatives), Denso has a financing structure that is riskier than that of its competitors. The refinancing issues could be a short-term problem, especially if the company has reputation issues. Banks and investors don't like to refinance debt if there are clouds on the horizon. For this reason, investors should look at the refinancing environment for Denso. Does it look safe that debt that is coming due can be covered with new debt? If that is the case, then the financing situation of the company is on the safer side. If not, it may be better to wait until refinancing has been completed and the Refinancing rank is good again. ...read more
Combined financial peformance: Denso Below-Average Financial Performance
| COMBINED PERFORMANCE | August 22, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 9 |
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| GROWTH | ||||||||
| GROWTH | 91 |
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| SAFETY | ||||||||
| SAFETY | 64 |
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| COMBINED | ||||||||
| COMBINED | 35 |
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ANALYSIS: With an Obermatt Combined Rank of 35 (worse than 65% compared with investment alternatives), Denso (Auto Parts & Equipment, Japan) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Denso are low in value (priced high) with a consolidated Value Rank of 9 (worse than 91% of alternatives), and are riskily financed (Safety Rank of 49, which means above-average debt burdens) but show above-average growth (Growth Rank of 91). ...read more
RECOMMENDATION: A Combined Rank of 35, is a hold recommendation based on Denso's financial characteristics. As the company Denso shows low value with an Obermatt Value Rank of 9 (91% 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 91% of comparable companies (Obermatt Growth Rank is 91). 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 49 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 Denso, even a low-value company (in terms of its key financial indicators) can be a good investment. ...read more
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