September 12, 2024
Top 10 Stock Melrose 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: Melrose – Top 10 Stock in FTSE 100 Index
Melrose is listed as a top 10 stock on September 12, 2024 in the market index FTSE 100 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 86 (top 86% performer), Obermatt assesses an overall strong buy recommendation for Melrose on September 12, 2024.
Snapshot: Obermatt Ranks
| Country | United Kingdom |
| Industry | Industrial Conglomerates |
| Index | FTSE All Shares, FTSE 100, FTSE 350, Dividends Europe, Electromobility |
| 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 Melrose Strong Buy
| 360 METRICS | September 12, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 41 |
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| GROWTH | ||||||||
| GROWTH | 47 |
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| SAFETY | ||||||||
| SAFETY | 52 |
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| SENTIMENT | ||||||||
| SENTIMENT | 92 |
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| 360° VIEW | ||||||||
| 360° VIEW | 86 |
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ANALYSIS: With an Obermatt 360° View of 86 (better than 86% compared with alternatives) for 2024, overall professional sentiment and financial characteristics for the stock Melrose are very positive. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for Melrose. The consolidated Sentiment Rank has a good rank of 92, which means that professional investors are more optimistic about the stock than for 92% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 52 or better than 52% 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 41, meaning that the share price of Melrose 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 47. ...read more
RECOMMENDATION: With a consolidated 360° View of 86, Melrose is better positioned than 86% 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 92) and safe financing practices (Safety Rank of 52), 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 Melrosẹ 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 Melrose very positive
ANALYSIS: With an Obermatt Sentiment Rank of 92 (better than 92% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Melrose is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for Melrose. Analyst Opinions are at a rank of 77 (better than 77% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 58, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in Melrose. The Professional Investors rank is 52, which means that currently, professional investors hold more stock in this company than in 52% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 87 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 87% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 92 (more positive than 92% compared with investment alternatives), Melrose has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean Melrose stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: Melrose Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 41 (worse than 59% compared with alternatives), Melrose shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with three out of four indicators below average for Melrose. Only the metric dividend yield has an above-average rank, reflecting that dividend practices are expected to be higher than 50% of comparable companies, making the stock an attractive buy for dividend investors. However, dividend investors may get disappointed because all other critical financial indicators are below the market median: Price-to-Sales is 25 which means that the stock price compared with what market professionals expect for future profits is higher than 75% of comparable companies, indicating a low value concerning Melrose's sales levels. The same is valid for Price-to-Profit (also referred to as price-earnings, P/E) with a rank of 48 which means that the stock price compared with what market professionals expect for future profit levels is higher than 52% of comparable companies. In addition, Price-to-Book (also referred to as market-to-book ratio) with a Price-to-Book Rank of 49 is also low. Compared with invested capital, the stock price is higher than for 51% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 41, is a hold recommendation based on Melrose's stock price compared with the company's operational size and dividend yields. Should dividend investors pick Melrose? The company-reported financials speak against it. The company is expensive compared with revenue and invested capital levels, two reliable company size indicators. In addition, it currently has a low level of profits. How can future dividends be paid in the case that profits remain low? Dividend investors should choose Melrose only if they reasonably expect the low current profit levels to be transitory. ...read more
Growth Strategy: Melrose Growth Momentum low
| GROWTH METRICS | September 12, 2024 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 34 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 73 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 53 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 45 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 47 |
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ANALYSIS: With an Obermatt Growth Rank of 47 (better than 47% compared with alternatives), Melrose 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, where half of the indicators are below and half above average for Melrose. Profit Growth, with a rank of 73 (better than 73% of its competitors), and Capital Growth, with a rank of 53, are both positive, which is a healthy sign for positive development. But Sales Growth has only a rank of 34, which means that, currently, professionals expect the company to grow less than 66% of its competitors, and Stock Returns are at a rank of 45. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 47, is a hold recommendation for growth and momentum investors. Stock returns that are a thing of the past can be less of a problem. Below-average revenue growth may be caused by divestments of underperforming businesses. If that is the case, then the positive developments of profit and capital growth are signs of a company with growth potential. If these are the reasons, overall growth is well on track to making this stock attractive for growth investors. ...read more
Safety Strategy: Melrose Debt Financing Safety above-average
| SAFETY METRICS | September 12, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 88 |
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| REFINANCING | ||||||||
| REFINANCING | 10 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 31 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 52 |
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ANALYSIS: With an Obermatt Safety Rank of 52 (better than 52% compared with alternatives), the company Melrose 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 Melrose 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 just one indicator above average for Melrose and the other two below average. Leverage is at a rank of 88 meaning the company has a below-average debt-to-equity ratio. It has less debt than 88% of its competitors.Refinancing is at a rank of 10, which means that the portion of the debt about to be refinanced is above-average. It has more debt in the refinancing stage than 90% of its competitors. Liquidity is at a rank of 31, meaning that the company generates less profit to service its debt than 69% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 52 (better than 52% compared with alternatives), Melrose has a financing structure that is safer than that of its competitors. This is an indication that the company is on the riskier side when it comes to debt service. There is only below-market average liquidity, and a short-term refinancing issue might be around the corner. But in the long-term, the debt levels of Melrose are on the safer side. ...read more
Combined financial peformance: Melrose Above-Average Financial Performance
| COMBINED PERFORMANCE | September 12, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 41 |
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| GROWTH | ||||||||
| GROWTH | 47 |
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| SAFETY | ||||||||
| SAFETY | 31 |
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| COMBINED | ||||||||
| COMBINED | 54 |
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ANALYSIS: With an Obermatt Combined Rank of 54 (better than 54% compared with investment alternatives), Melrose (Industrial Conglomerates, United Kingdom) shares have above-average financial characteristics compared with similar stocks. Shares of Melrose are low in value (priced high) with a consolidated Value Rank of 41 (worse than 59% of alternatives) and show below-average growth (Growth Rank of 47) but are safely financed (Safety Rank of 52), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 54, is a buy recommendation based on Melrose's financial characteristics. As the company Melrose's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 41) and low growth (Obermatt Growth Rank of 47), 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 52) 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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