November 21, 2024
Top 10 Stock Discovery 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: Discovery – Top 10 Stock in Johannesburg Securities Exchange All Shares Index JSE All Shares
Discovery is listed as a top 10 stock on November 21, 2024 in the market index JSE All Shares because of its high performance in at least one of the Obermatt investment strategies. Three consolidated Obermatt Ranks are above-average. Only the Value Rank is below average. The investment rationale may be an investment in future growth, supported by professional market opinion. Based on the Obermatt 360° View of 92 (top 92% performer), Obermatt assesses an overall strong buy recommendation for Discovery on November 21, 2024.
Snapshot: Obermatt Ranks
| Country | South Africa |
| Industry | Life & Health Insurance |
| Index | JSE All Shares |
| Size class | X-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 Discovery Strong Buy
| 360 METRICS | November 21, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 31 |
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| GROWTH | ||||||||
| GROWTH | 79 |
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| SAFETY | ||||||||
| SAFETY | 88 |
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| SENTIMENT | ||||||||
| SENTIMENT | 61 |
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| 360° VIEW | ||||||||
| 360° VIEW | 92 |
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ANALYSIS: With an Obermatt 360° View of 92 (better than 92% compared with alternatives) for 2022, overall professional sentiment and financial characteristics for the stock Discovery are very positive. The 360° View is based on consolidating four consolidated indicators, with all but one indicator above average for Discovery. The consolidated Growth Rank has a good rank of 79, 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 79% of competitors in the same industry. The consolidated Safety Rank at 88 means that the company has a financing structure that is safer than 88% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. Finally, the consolidated Sentiment Rank has a good rank of 61, which means that professional investors are more optimistic about the stock than for 61% of alternative investment opportunities. But the consolidated Value Rank is less desirable at 31, meaning that the share price of Discovery is on the higher side compared with indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 69% of alternative stocks in the same industry. ...read more
RECOMMENDATION: With a consolidated 360° View of 92, Discovery is better positioned than 92% of all alternative stock investment opportunities based on the Obermatt Method. As three out of four consolidated Obermatt Ranks exhibit excellent performance, such as above-average growth (Growth Rank of 79), a safe financing structure (Safety Rank of 88), and positive professional market sentiment (Sentiment Rank of 61), it is a solid stock investment where growth may be the strongest driver of the investment rationale, also reflected by institutional investors. 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 more do you pay for the stock of Discovery compared with alternatives? You can use the following rule of thumb: The growth rank measures the growth momentum of the company (79% better than peers). The value rank could be the reverse reflection of that (21%). A Value Rank below that level may be assessed as expensive, a rank above that is still good value. Sometimes market sentiment just reflects the past, sometimes the 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 Discovery positive
ANALYSIS: With an Obermatt Sentiment Rank of 61 (better than 61% compared with alternatives), overall professional sentiment and engagement for the stock Discovery is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Discovery. Analyst Opinions are at a rank of 30 (worse than 70% 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 25, which means that stock research experts are getting even more pessimistic. Other sentiment indicators are positive: The Professional Investors rank is 100, which means that professional investors hold more stock in this company than in 100% of alternative investment opportunities. So, pros tend to favor investing in this company. In addition, Market Pulse has a rank of 67, which means that the current professional news and professional social networks tend to be positive when discussing this company (more positive news than for 67% of competitors). While stock research analysts are getting ever more critical, many professional investors are committed to Discovery and the professional news channels are on the positive side. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 61 (more positive than 61% compared with investment alternatives), Discovery has a reputation among professional investors that is above-average compared with that of its competitors. This is an ambiguous picture: analysts are negative and getting even more critical, while the news in the market is positive. Who should investors believe? This is a difficult question in such a situation. Investors should proceed cautiously and verify not only the financial performance in the Obermatt Value, Growth and Safety Ranks but also independent news coverage of the company. ...read more
Value Strategy: Discovery Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 31 (worse than 69% compared with alternatives), Discovery shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with all four indicators below average for Discovery. Price-to-Sales is 43 which means that the stock price compared with what market professionals expect for future profits is higher than 57% of comparable companies, indicating a low value concerning Discovery's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Price-to-Book Rank of 38, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of Discovery. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 37 and Dividend Yield, which is lower than 61% 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 31, is a hold recommendation based on Discovery's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for Discovery? 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 Discovery? 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. Discovery 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: Discovery Growth Momentum high
| GROWTH METRICS | November 21, 2024 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 27 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 74 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 91 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 81 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 79 |
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ANALYSIS: With an Obermatt Growth Rank of 79 (better than 79% compared with alternatives) for 2022, Discovery 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 Discovery. Profit Growth has a rank of 74 which means that currently professionals expect the company to grow its profits more than 74% of its competitors. The same is valid for capital growth and stock returns. Capital Growth has a rank of 91, and Stock Returns has a rank of 81 which means that the stock returns have recently been above 81% of alternative investments. Only revenue growth is low with a Sales Growth has a rank of 27 (73% of its competitors are better). ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 79, 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: Discovery Debt Financing Safety very solid
| SAFETY METRICS | November 21, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 43 |
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| REFINANCING | ||||||||
| REFINANCING | 77 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 65 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 88 |
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ANALYSIS: With an Obermatt Safety Rank of 88 (better than 88% compared with alternatives) for 2022, the company Discovery has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Discovery 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 Discovery. Refinancing is at 77, meaning the portion of the debt that is about to be refinanced is below average. It has less debt in the refinancing stage than 77% of its competitors. Liquidity is also good at 65, meaning the company generates more profit to service its debt than 65% of its competitors. This indicates that the company is safer when it comes to debt service. However, Leverage is rather large at 43, which means the company has an above-average debt-to-equity ratio. It has more debt than 57% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 88 (better than 88% compared with alternatives), Discovery 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 Discovery 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: Discovery Top Financial Performance
| COMBINED PERFORMANCE | November 21, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 31 |
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| GROWTH | ||||||||
| GROWTH | 79 |
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| SAFETY | ||||||||
| SAFETY | 65 |
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| COMBINED | ||||||||
| COMBINED | 88 |
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ANALYSIS: With an Obermatt Combined Rank of 88 (better than 88% compared with investment alternatives), Discovery (Life & Health Insurance, South Africa) shares have much better financial characteristics than comparable stocks. Shares of Discovery are low in value (priced high) with a consolidated Value Rank of 31 (worse than 69% of alternatives). But they show above-average growth (Growth Rank of 79) and are safely financed (Safety Rank of 88, which means below-average debt burdens). ...read more
RECOMMENDATION: A Combined Rank of 88, is a strong buy recommendation based on Discovery's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company Discovery exhibits low value (Obermatt Value Rank of 31), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 79). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 88) are a double-edged sword: if the company continues growing, low debt limits shareholder returns. But if the company increases its debt, it will also increase risk. In other words, this is an investment on the safer side, despite the above-average price (low value). ...read more
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