July 25, 2024
Top 10 Stock HDFC Bank Sell 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: HDFC Bank – Top 10 Stock in Bombay Stock Exchange Sensitive Index BSE Sensex
HDFC Bank is listed as a top 10 stock on July 25, 2024 in the market index BSE Sensex because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. While the company shows high growth, the stock price is high yet professional investor sentiment is low, which may be due to overly optimistic investor behavior, reflected in a low stock price value. Based on the Obermatt 360° View of 21 (21% performer), Obermatt issues an overall sell recommendation for HDFC Bank on July 25, 2024.
Snapshot: Obermatt Ranks
| Country | India |
| Industry | Diversified Banks |
| Index | BSE Sensex, Good Governace Growth Markets, CNX Nifty 50 |
| 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 HDFC Bank Sell
| 360 METRICS | July 25, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 16 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 75 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 55 |
|
||||||
| SENTIMENT | ||||||||
| SENTIMENT | 9 |
|
||||||
| 360° VIEW | ||||||||
| 360° VIEW | 21 |
|
||||||
ANALYSIS: With an Obermatt 360° View of 21 (better than 21% compared with alternatives), overall professional sentiment and financial characteristics for the stock HDFC Bank are critical, mostly below average. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for HDFC Bank. The consolidated Growth Rank has a good rank of 75, 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 75% of competitors in the same industry. In addition, the consolidated Safety Rank has a safer rank of 55 which means that the company has a financing structure that is safer than 55% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the consolidated Value Rank has a less desirable rank of 16 which means that the share price of HDFC Bank is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is higher than for 84% of alternative stocks in the same industry. The consolidated Sentiment Rank also has a low rank of 9, which means that professional investors are more pessimistic about the stock than for 91% of alternative investment opportunities. ...read more
RECOMMENDATION: With a consolidated 360° View of 21, HDFC Bank is worse than 79% of all alternative stock investment opportunities based on the Obermatt Method. This means that HDFC Bank shares are on the riskier side for investors. As only half of the consolidated Obermatt Ranks exhibit excellent performance, the picture is ambiguous. Growth is above-average (Growth Rank of 75), and the company is safely financed (Safety Rank of 55). However, professional market sentiment is low(Sentiment Rank of 9). The negative market view on HDFC Bank 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 board the train, they may drive stock prices above reasonable levels. It is typical for growth companies to have low value ratings, because 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 HDFC Bank compared with alternatives? You can use the following rule of thumb: The value rank shouldn’t be lower than one hundred 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 if the value rank is above 60. As market sentiment is low, 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 HDFC Bank negative
ANALYSIS: With an Obermatt Sentiment Rank of 9 (better than 9% compared with alternatives), overall professional sentiment and engagement for the stock HDFC Bank is critical, mostly below average. The Sentiment Rank is based on consolidating four sentiment indicators, with three out of four metrics below average for HDFC Bank. Analyst Opinions are at a rank of 89 (better than 89% 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 15, 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 HDFC Bank. The Professional Investors rank is also low at 4, meaning that professional investors hold less stock in this company than in 96% of alternative investment opportunities. Pros tend to invest in other companies. Even worse, Market Pulse has a low rank of 6, which means that the current professional news and professional social networks are critical of this company (more negative news than for 94% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 9 (less encouraging than 91% compared with investment alternatives), HDFC Bank has a reputation among professional investors that is far 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: HDFC Bank Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 16 (worse than 84% compared with alternatives), HDFC Bank 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 HDFC Bank. Price-to-Sales is 16 which means that the stock price compared with what market professionals expect for future profits is higher than 84% of comparable companies, indicating a low value concerning HDFC Bank's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Price-to-Book Rank of 22, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of HDFC Bank. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 19 and Dividend Yield, which is lower than 76% 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 16, is a sell recommendation based on HDFC Bank's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for HDFC Bank? 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 HDFC Bank? 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. HDFC Bank 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: HDFC Bank Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 75 (better than 75% compared with alternatives) for 2024, HDFC Bank 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 HDFC Bank. Sales Growth has a value of 78 which means that currently professionals expect the company to grow more than 78% of its competitors. Profit Growth with a value of 62 and Capital Growth with a rank of 100 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 31, which means that stock returns have recently been below 69% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 75, is a buy recommendation for growth and momentum investors. HDFC Bank 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 HDFC Bank, 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: HDFC Bank Debt Financing Safety above-average
| SAFETY METRICS | July 25, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| LEVERAGE | ||||||||
| LEVERAGE | 34 |
|
||||||
| REFINANCING | ||||||||
| REFINANCING | 51 |
|
||||||
| LIQUIDITY | ||||||||
| LIQUIDITY | 68 |
|
||||||
| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 55 |
|
||||||
ANALYSIS: With an Obermatt Safety Rank of 55 (better than 55% compared with alternatives), the company HDFC Bank 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 HDFC Bank 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 HDFC Bank. Refinancing is at 51, meaning the portion of the debt that is about to be refinanced is below average. It has less debt in the refinancing stage than 51% of its competitors. Liquidity is also good at 68, meaning the company generates more profit to service its debt than 68% of its competitors. This indicates that the company is safer when it comes to debt service. However, Leverage is rather large at 34, which means the company has an above-average debt-to-equity ratio. It has more debt than 66% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 55 (better than 55% compared with alternatives), HDFC Bank has a financing structure that is 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 HDFC Bank 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: HDFC Bank Below-Average Financial Performance
| COMBINED PERFORMANCE | July 25, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 16 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 75 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 68 |
|
||||||
| COMBINED | ||||||||
| COMBINED | 41 |
|
||||||
ANALYSIS: With an Obermatt Combined Rank of 41 (worse than 59% compared with investment alternatives), HDFC Bank (Diversified Banks, India) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of HDFC Bank are low in value (priced high) with a consolidated Value Rank of 16 (worse than 84% of alternatives). But they show above-average growth (Growth Rank of 75) and are safely financed (Safety Rank of 55, which means below-average debt burdens). ...read more
RECOMMENDATION: A Combined Rank of 41, is a hold recommendation based on HDFC Bank's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company HDFC Bank exhibits low value (Obermatt Value Rank of 16), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 75). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 55) 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
Obermatt Portfolio Performance
We’re so convinced about our research, that we buy our stock tips.
See the performance of the Obermatt portfolio.