July 6, 2023
Top 10 Stock Dr. Reddy's 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: Dr. Reddy's – Top 10 Stock in Nifty 50 India Index CNX Nifty 50
Dr. Reddy's is listed as a top 10 stock on July 06, 2023 in the market index CNX Nifty 50 because of its high performance in at least one of the Obermatt investment strategies. While only half of the consolidated Obermatt Ranks exhibit above-average performance, the professional market sentiment is positive and it may be a solid investment proposition, especially if a growth recovery is to be expected soon. Based on the Obermatt 360° View of 77 (top 77% performer), Obermatt assesses an overall strong buy recommendation for Dr. Reddy's on July 06, 2023.
Snapshot: Obermatt Ranks
| Country | India |
| Industry | Pharmaceuticals |
| Index | Good Governace Growth Markets, Independent Boards Growth Markets, Low Waste, Recycling, CNX Nifty 50 |
| 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 Dr. Reddy's Strong Buy
| 360 METRICS | July 6, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 59 |
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| GROWTH | ||||||||
| GROWTH | 21 |
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| SAFETY | ||||||||
| SAFETY | 38 |
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| SENTIMENT | ||||||||
| SENTIMENT | 70 |
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| 360° VIEW | ||||||||
| 360° VIEW | 77 |
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ANALYSIS: With an Obermatt 360° View of 77 (better than 77% compared with alternatives) for 2023, overall professional sentiment and financial characteristics for the stock Dr. Reddy's are very positive. The 360° View is based on consolidating four consolidated indicators, with half the metrics below and half above average for Dr. Reddy's. The consolidated Value Rank has an attractive rank of 59, which means that the share price of Dr. Reddy's is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is lower than for 59% of alternative stocks in the same industry. The consolidated Sentiment Rank has a good rank of 70, which means that professional investors are more optimistic about the stock than for 70% of alternative investment opportunities. But the consolidated Growth Rank has a low rank of 21, which means that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth, and stock returns. The consolidated Safety Rank has a riskier rank of 38, meaning the company has a riskier financing structure than 62 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 77, Dr. Reddy's is better positioned than 77% of all alternative stock investment opportunities based on the Obermatt Method. Half of the consolidated Obermatt Ranks exhibit above-average performance, but the other half are below market levels. The company enjoys a good value (Value Rank of 59) and positive market sentiment in the professional investor community (Sentiment Rank of 70), but growth expectations are below-average (Growth Rank of 21) and the financing structure is on the risky side(Safety Rank of 38). This combination is rather dangerous, because high debt levels (low safety) require growth to finance the debt burden. The current low growth level may be temporary, because professionals are actually optimistic (positive sentiment). Good value is sometimes an indication that the company's future is challenging. The below-par growth performance may be the reason for this assessment. Companies with less growth typically have a lower price than fast-growing competitors. Even though professional investor sentiment is strong, we recommend further evaluating whether the future of Dr. Reddy's is as challenging as the stock's low price suggests. Since the professional community is optimistic, the stock might just be going through a more challenging phase now, indicating that timing might be good now. ...read more
Sentiment Strategy: Professional Market Sentiment for Dr. Reddy's positive
ANALYSIS: With an Obermatt Sentiment Rank of 70 (better than 70% compared with alternatives), overall professional sentiment and engagement for the stock Dr. Reddy's is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Dr. Reddy's. 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 55, which indicates a shift in stock research experts opinions for the better. In other words, they are getting more optimistic about stock investments in Dr. Reddy's. Even better, the Professional Investors rank is 57, meaning that professional investors hold more stock in this company than in 57% of alternative investment opportunities. Pros tend to favor investing in this company. Furthermore, Market Pulse has a rank of 89, which means that the current professional news and professional social networks are upbeat when discussing this company (more positive news than for 89% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 70 (more positive than 70% compared with investment alternatives), Dr. Reddy's has a reputation among professional investors that is above-average compared with 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: Dr. Reddy's Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 59 (better than 59% compared with alternatives), Dr. Reddy's shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with three out of four indicators above average for Dr. Reddy's. Price-to-Sales (P/S) is 58, which means that the stock price compared with what market professionals expect for future sales is lower than for 58% of comparable companies, indicating a good value regarding Dr. Reddy's's revenue size. The same is valid for expected Price to Profits (or Price / Earnings, P/E), more favorable than for 68% of alternatives, and it's also true for the Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 61. But, compared with other companies in the same industry, dividend yields are expected to be lower than average; only 42% of all competitors have even lower dividend yields than Dr. Reddy's (a Dividend Yield Rank of 42). 58% alternative investments in the same business provide a higher dividend yield. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 59, is a buy recommendation based on Dr. Reddy's's stock price compared with the company's operational size and dividend yields. The below-average dividend yield may be a good sign, as it could mean the company has more attractive investment opportunities for the generated cash than to pay it out as dividends. A low dividend yield can also indicate a growth phase. ...read more
Growth Strategy: Dr. Reddy's Growth Momentum negative
ANALYSIS: With an Obermatt Growth Rank of 21 (better than 21% compared with alternatives), Dr. Reddy's shows one of the most restricted growth dynamics in its industry. There is little momentum in this company. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Dr. Reddy's. Capital Growth has a rank of 50, which means that currently professionals expect the company to grow its invested capital more than 17% of its competitors. Investors welcomed this, visible in the Stock Returns rank of 59 (above 59% of alternative investments). But Sales Growth has only a rank of 19, which means that, currently, professionals expect the company to grow less than 81% of its competitors, and Profit Growth is also low at a rank of 17. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 21, is a sell recommendation for growth and momentum investors. This is an ambiguous picture. Revenue growth and capital growth are strong, but the growth in profit, which seems good, can also be an indication that growth momentum may be negative. The fact that stock returns have been above average doesn't help much, as stock returns are less reliable in showing a company’s future growth potential. Prices may perform well for the simple reason that investors were too pessimistic in the past and are now correcting their opinions and moving the stock price to a more reasonable level. As the growth picture is mixed for Dr. Reddy's, investors may want to look at value and sentiment indicators for a well-rounded picture of this stock. ...read more
Safety Strategy: Dr. Reddy's Debt Financing Safety below-average
| SAFETY METRICS | July 6, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 60 |
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| REFINANCING | ||||||||
| REFINANCING | 74 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 41 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 38 |
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ANALYSIS: With an Obermatt Safety Rank of 38 (better than 38% compared with alternatives), the company Dr. Reddy's 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 Dr. Reddy's 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 Dr. Reddy's.Leverage is at 60, meaning the company has a below-average debt-to-equity ratio. It has less debt than 60% of its competitors.Refinancing is at a rank of 74, 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 74% of its competitors. Liquidity is at 41, meaning that the company generates less profit to service its debt than 59% 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 38 (worse than 62% compared with alternatives), Dr. Reddy's has a financing structure that is 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: Dr. Reddy's Above-Average Financial Performance
| COMBINED PERFORMANCE | July 6, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 59 |
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| GROWTH | ||||||||
| GROWTH | 21 |
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| SAFETY | ||||||||
| SAFETY | 41 |
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| COMBINED | ||||||||
| COMBINED | 50 |
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ANALYSIS: With an Obermatt Combined Rank of 50 (better than 50% compared with investment alternatives), Dr. Reddy's (Pharmaceuticals, India) shares have above-average financial characteristics compared with similar stocks. Shares of Dr. Reddy's are a good value (attractively priced) with a consolidated Value Rank of 59 (better than 59% of alternatives) but show below-average growth (Growth Rank of 21), and are riskily financed (Safety Rank of 38), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 50, is a buy recommendation based on Dr. Reddy's's financial characteristics. As the company Dr. Reddy's's key financial metrics exhibit good value (Obermatt Value Rank of 59) but low growth (Obermatt Growth Rank of 21) and risky financing practices (Obermatt Safety Rank of 38), it may be a risky investment, because debt in times of crises can make things worse. The good value, better than 59% of comparable companies, may indicate the company's future is challenging. If you believe that low growth is temporary or just due to a specific current event, you may conclude that the good value of the stock provides an attractive investment opportunity. ...read more
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