August 10, 2023
Top 10 Stock ERG 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: ERG – Top 10 Stock in Milano Italia Borsa Index MIB
ERG is listed as a top 10 stock on August 10, 2023 in the market index MIB 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 28 (28% performer), Obermatt assesses an overall hold recommendation for ERG on August 10, 2023.
Snapshot: Obermatt Ranks
| Country | Italy |
| Industry | Power Producers & Traders |
| Index | MIB, Human Rights |
| Size class | 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 ERG Hold
| 360 METRICS | August 10, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 17 |
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| GROWTH | ||||||||
| GROWTH | 29 |
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| SAFETY | ||||||||
| SAFETY | 74 |
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| SENTIMENT | ||||||||
| SENTIMENT | 53 |
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| 360° VIEW | ||||||||
| 360° VIEW | 28 |
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ANALYSIS: With an Obermatt 360° View of 28 (better than 28% compared with alternatives), overall professional sentiment and financial characteristics for the stock ERG are below the industry average. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for ERG. The consolidated Sentiment Rank has a good rank of 53, which means that professional investors are more optimistic about the stock than for 53% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 74 or better than 74% 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 17, meaning that the share price of ERG 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 28, ERG is worse than 72% 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 53) and safe financing practices (Safety Rank of 74), 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 ERG̣ 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 ERG positive
ANALYSIS: With an Obermatt Sentiment Rank of 53 (better than 53% compared with alternatives), overall professional sentiment and engagement for the stock ERG is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for ERG. Analyst Opinions are at a rank of 83 (better than 83% 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 50, which means that stock research experts are changing their opinions for the better in recommending investing in the company. In other words, they are getting even more optimistic about investments in ERG. Finally, the Professional Investors rank is 51, which means that currently, professional investors hold more stock in this company than in 51% of alternative investment opportunities. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 53 (more positive than 53% compared with investment alternatives), ERG has a reputation among professional investors that is above-average compared with that of its competitors. Pros tend to favor investing in this company. But there is also a signal for caution. Market Pulse has a rank of 22, which means that the current professional news and professional social networks tend to be negative when discussing this company (more negative news than for 78% of competitors). This could mean future risks and should make investors careful. Attention to negative news for ERG is worthwhile because they may be early warning signals. Without those, all other professional signals are encouraging, especially since analysts are getting more optimistic. ...read more
Value Strategy: ERG Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 17 (worse than 83% compared with alternatives), ERG 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 ERG. Price-to-Sales is 13 which means that the stock price compared with what market professionals expect for future profits is higher than 87% of comparable companies, indicating a low value concerning ERG's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Price-to-Book Rank of 37, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of ERG. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 25 and Dividend Yield, which is lower than 60% 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 17, is a sell recommendation based on ERG's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for ERG? 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 ERG? 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. ERG 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: ERG Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 29 (better than 29% compared with alternatives), ERG 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 half of the indicators below and half above average for ERG. Sales Growth has a rank of 78 which means that currently, professionals expect the company to grow more than 78% of its competitors. Capital Growth is also above 14% of competitors with a rank of 62. But Profit Growth only has a rank of 14, which means that currently professionals expect the company to grow its profits less than 86% of its competitors. And Stock Returns have also been below average with a rank of only 19. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 29, is a hold recommendation for growth and momentum investors. Profits are sometimes low if the company invests in the future. The positive revenue and capital investment outlook confirms such an interpretation. Both revenues and capital are solid growth indicators, and lower profits in such a case would be encouraging. But the investors see it differently by punishing the share price. Sometimes, Mister Market is not very reliable, because it is not uncommon for it to be volatile. Investors should look out for signs of growth expenditure that could justify low profit growth, and they may also find reasons why recent stock price developments don't confirm the growth outlook of operations. While operating growth indicators are not perfect, they are more reliable indicators for future performance than stock prices that can repeatedly surprise investors. ...read more
Safety Strategy: ERG Debt Financing Safety above-average
| SAFETY METRICS | August 10, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 52 |
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| REFINANCING | ||||||||
| REFINANCING | 59 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 70 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 74 |
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ANALYSIS: With an Obermatt Safety Rank of 74 (better than 74% compared with alternatives), the company ERG has financing practices on the safer side, which mean that their overall debt burden is lower than average. This doesn't mean that the business of ERG 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, where all three are above average for ERG. Leverage is at 52, meaning the company has a below-average debt-to-equity ratio. It has less debt than 52% of its competitors. Refinancing is at a rank of 59, meaning that the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 59% of its competitors. Finally, Liquidity is also good at a rank of 70, which means that the company generates more profit to service its debt than 70% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 74 (better than 74% compared with alternatives), ERG has a financing structure that is safer than that of its competitors. These three positive financing indicators signal that the company is less likely to default on its debt obligations. However, it also means that its shareholder returns will be more modest if things go well. A low safety means fewer troubles in downtimes and less upside in good times. ...read more
Combined financial peformance: ERG Lowest Financial Performance
| COMBINED PERFORMANCE | August 10, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 17 |
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| GROWTH | ||||||||
| GROWTH | 29 |
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| SAFETY | ||||||||
| SAFETY | 70 |
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| COMBINED | ||||||||
| COMBINED | 22 |
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ANALYSIS: With an Obermatt Combined Rank of 22 (worse than 78% compared with investment alternatives), ERG (Power Producers & Traders, Italy) shares have lower financial characteristics compared with similar stocks. Shares of ERG are low in value (priced high) with a consolidated Value Rank of 17 (worse than 83% of alternatives) and show below-average growth (Growth Rank of 29) but are safely financed (Safety Rank of 74), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 22, is a sell recommendation based on ERG's financial characteristics. As the company ERG's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 17) 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 74) 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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