June 20, 2024
Top 10 Stock Fortescue 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: Fortescue – Top 10 Stock in Australian Securities Exchange Index ASX 50
Fortescue is listed as a top 10 stock on June 20, 2024 in the market index ASX 50 because of its high performance in at least one of the Obermatt investment strategies. Only one consolidated Obermatt Rank is above-average. The company enjoys a positive professional investor sentiment, but all financial facts speak against a stock purchase. This is probably an investment into the future. Based on the Obermatt 360° View of 30 (30% performer), Obermatt assesses an overall hold recommendation for Fortescue on June 20, 2024.
Snapshot: Obermatt Ranks
| Country | Australia |
| Industry | Steel |
| Index | ASX 100, ASX 200, ASX 300, ASX 50, Low Emissions, Human Rights |
| 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 Fortescue Hold
| 360 METRICS | June 20, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 40 |
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| GROWTH | ||||||||
| GROWTH | 35 |
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| SAFETY | ||||||||
| SAFETY | 48 |
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| SENTIMENT | ||||||||
| SENTIMENT | 60 |
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| 360° VIEW | ||||||||
| 360° VIEW | 30 |
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ANALYSIS: With an Obermatt 360° View of 30 (better than 30% compared with alternatives), overall professional sentiment and financial characteristics for the stock Fortescue are below the industry average. The 360° View is based on consolidating four consolidated indicators, with three out of four indicators below average for Fortescue. The consolidated Sentiment Rank has a good rank of 60, which means that professional investors are more optimistic about the stock than for 60% of alternative investment opportunities. But all other ranks are below average. The consolidated Value Rank has a rank of 40, which means that the share price of Fortescue is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. The consolidated Growth Rank also has a low rank of 35, meaning that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth, and stock returns. This means that growth is lower than for 35% of competitors in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 48 which means that the company has a riskier financing structure than 52% 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 30, Fortescue is worse than 70% of all alternative stock investment opportunities based on the Obermatt Method. As only the professional market sentiment (Sentiment Rank of 60) is above-average, and all other consolidated Obermatt Ranks are below peers, the stock investing proposition case is rather weak. The stock price is expensive for a company of this size in this industry, visible in the below-average Value Rank. Growth is below the competition based on the Growth Rank, and the company has more debt than other companies, according to the Safety Rank. So the question becomes: How important is the Sentiment Rank when all others are below average? When it comes to growth, the low rating might be justified if growth is expected in the future and not yet reflected in current performance. This is often the case for companies with intellectual property, such as technology and pharmaceutical companies. In the early phases, these companies are expensive compared with their size and may have a lot of debt on their books, as is the case here, as seen in the low Value and Safety Ranks. Future growth may be the strongest investment rationale in this case, which is only reflected by institutional investors' opinions. You pay more than the market average for this stock and invest in a rather debt-loaded enterprise, but it may be worth it if the future of Fortescuẹ is bright. A small investment might be justified, but proceed with caution. ...read more
Sentiment Strategy: Professional Market Sentiment for Fortescue positive
ANALYSIS: With an Obermatt Sentiment Rank of 60 (better than 60% compared with alternatives), overall professional sentiment and engagement for the stock Fortescue is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Fortescue. Analyst Opinions are at a rank of 3 (worse than 97% 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 66, which indicates a shift in stock research experts opinions for the better. In other words, they are getting more optimistic about stock investments in Fortescue. Even better, the Professional Investors rank is 83, meaning that professional investors hold more stock in this company than in 83% of alternative investment opportunities. Pros tend to favor investing in this company. Furthermore, Market Pulse has a rank of 66, which means that the current professional news and professional social networks are upbeat when discussing this company (more positive news than for 66% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 60 (more positive than 60% compared with investment alternatives), Fortescue 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: Fortescue Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 40 (worse than 60% compared with alternatives), Fortescue shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Fortescue. Price-to-Profit (also referred to as price-earnings, P/E) is 56 which means that the stock price compared with what market professionals expect for future profits is lower than for 56% of comparable companies, indicating a good value concerning Fortescue's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 13, which means that the stock price is lower as regards to invested capital than for 13% of comparable investments. On the other hand, Price-to-Sales is less favorable than 88% of alternatives (only 12% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than 7% of comparable companies, making the stock more expensive as regards to the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 40, is a hold recommendation based on Fortescue's stock price compared with the company's operational size and dividend yields. This is a puzzling picture, because it means that profits are high while dividends are low. Since the stock price is low compared with invested capital but high in respect to expected revenues, it means that the company has more invested capital than peers for generating the same amount of revenue. Since profits are higher, it could be a "cash cow" situation (using the classic Boston Consulting BCG matrix naming convention) where the company is on a downward trend, still living from the profits of past products. As the company pays low dividends, it may harbor the opinion that a turnaround is possible, and it rather invests the cash than pay it out to shareholders, thus sealing the company's fate early. Any investment optimism should only be a buy trigger once thorough research is completed. ...read more
Growth Strategy: Fortescue Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 35 (better than 35% compared with alternatives), Fortescue 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 all but one indicator above average for Fortescue. Profit Growth has a rank of 50 which means that currently professionals expect the company to grow its profits more than 50% of its competitors. The same is valid for capital growth and stock returns. Capital Growth has a rank of 73, and Stock Returns has a rank of 54 which means that the stock returns have recently been above 54% of alternative investments. Only revenue growth is low with a Sales Growth has a rank of 6 (94% of its competitors are better). ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 35, is a hold 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: Fortescue Debt Financing Safety below-average
| SAFETY METRICS | June 20, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 40 |
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| REFINANCING | ||||||||
| REFINANCING | 33 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 77 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 48 |
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ANALYSIS: With an Obermatt Safety Rank of 48 (better than 48% compared with alternatives), the company Fortescue 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 Fortescue 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 just one indicator above average for Fortescue. Liquidity is at 77, meaning the company generates more profit to service its debt than 77% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier at a rank of 33, 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 67% of its competitors. Leverage is also high at a rank of 40, which means that the company has an above-average debt-to-equity ratio. It has more debt than 60% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 48 (worse than 52% compared with alternatives), Fortescue has a financing structure that is riskier than that of its competitors. High Leverage (a low Obermatt Leverage Rank) is good in good times, because it usually indicates that shareholders get higher returns. The good Liquidity performance of the company is an indicator that this is the case. However, if you expect an economic downturn, you may stay clear of this stock because they have an above-average debt level that needs refinancing soon. ...read more
Combined financial peformance: Fortescue Below-Average Financial Performance
| COMBINED PERFORMANCE | June 20, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 40 |
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| GROWTH | ||||||||
| GROWTH | 35 |
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| SAFETY | ||||||||
| SAFETY | 77 |
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| COMBINED | ||||||||
| COMBINED | 27 |
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ANALYSIS: With an Obermatt Combined Rank of 27 (worse than 73% compared with investment alternatives), Fortescue (Steel, Australia) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Fortescue are low in value (priced high) with a consolidated Value Rank of 40 (worse than 60% of alternatives), show below-average growth (Growth Rank of 35), and are riskily financed (Safety Rank of 48), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 27, is a hold recommendation based on Fortescue's financial characteristics. As the company Fortescue's key financial metrics all exhibit below-average performance, such as low value (Obermatt Value Rank of 40), low growth (Obermatt Growth Rank of 35), and risky financing practices (Obermatt Safety Rank of 48), 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. Such poor financial performance sometimes indicates that the company's business is all concentrated in some distant future. This is sometimes the case for high-tech or biotechnology companies. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and risky today. In such cases, the Obermatt Method has limited value as it is based on facts we can observe today. If the facts are all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that should only amount to a small fraction of a safe portfolio. ...read more
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