June 22, 2023
Top 10 Stock Rolls-Royce 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: Rolls-Royce – Top 10 Stock in FTSE 100 Index
Rolls-Royce is listed as a top 10 stock on June 22, 2023 in the market index FTSE 100 because of its high performance in at least one of the Obermatt investment strategies. Only one consolidated Obermatt Rank is above-average. The company is growing above average, but all other facts speak against a stock purchase, especially the low market sentiment by professional investors. Based on the Obermatt 360° View of 38 (38% performer), Obermatt assesses an overall hold recommendation for Rolls-Royce on June 22, 2023.
Snapshot: Obermatt Ranks
| Country | United Kingdom |
| Industry | Aerospace & Defense |
| Index | FTSE All Shares, FTSE 100, FTSE 350, Employee Focus EU, SDG 12, SDG 13, SDG 16, SDG 7, SDG 8 |
| 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 Rolls-Royce Hold
| 360 METRICS | June 22, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 37 |
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| GROWTH | ||||||||
| GROWTH | 99 |
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| SAFETY | ||||||||
| SAFETY | 32 |
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| SENTIMENT | ||||||||
| SENTIMENT | 23 |
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| 360° VIEW | ||||||||
| 360° VIEW | 38 |
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ANALYSIS: With an Obermatt 360° View of 38 (better than 38% compared with alternatives), overall professional sentiment and financial characteristics for the stock Rolls-Royce are below the industry average. The 360° View is based on consolidating four consolidated indicators, with three out of four indicators below average for Rolls-Royce. The consolidated Growth Rank has a good rank of 99, 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. It ranks higher than 99% of competitors in the same industry. The other indicators are below average, namely the Value, Safety, and Sentiment Ranks.The Value Rank at 37 means that the share price of Rolls-Royce is on the high side compared with its peers regarding revenues, profits, and invested capital. The stock price is higher than for 63% of alternative stocks in the same industry. The consolidated Safety Rank has a riskier rank of 32, which means that the company has a riskier financing structure than 68% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. The consolidated Sentiment Rank also has a low rank of 23, indicating professional investors are more pessimistic about the stock than for 77% of alternative investment opportunities. ...read more
RECOMMENDATION: With a 360° View of 38, Rolls-Royce is worse than 62% of all alternative stock investment opportunities based on the Obermatt Method. As only one of the consolidated Obermatt Ranks exhibits excellent performance, namely the above-average growth (Growth Rank of 99), it is a riskier stock investment proposition. Aside from the critical professional market sentiment (Sentiment Rank of 23), the company is rather risky when it comes to financing (Safety Rank of 32). The negative market view on Rolls-Royce 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 join the party, they may drive stock prices above reasonable levels. While it is typical for growth companies to have low value, because investors are willing to pay more for companies that are expected to have high growth, the crucial question is: how much more do you pay for the stock of Rolls-Royce compared with alternatives? You can use the following rule of thumb: The value rank shouldn’t be lower than one 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 (even though it is lower than 50). As market sentiment is critical, 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 Rolls-Royce negative
ANALYSIS: With an Obermatt Sentiment Rank of 23 (better than 23% compared with alternatives), overall professional sentiment and engagement for the stock Rolls-Royce is critical, mostly below average. The Sentiment Rank is based on consolidating four sentiment indicators, with three out of four metrics below average for Rolls-Royce. Analyst Opinions are at a rank of 34 (worse than 66% 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 53, which means that stock research experts have found something to make them more positive about investing in the company. In other words, they are getting more optimistic of stock investments in Rolls-Royce. But the Professional Investors rank is low at 37, which means that professional investors hold less stock in this company than in 63% of alternative investment opportunities. Pros tend to invest in other companies. Market Pulse is also low at a rank of 32, which means that the current professional news and professional social networks tend to be negative when discussing this company (more negative news than for 68% of competitors). ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 23 (less encouraging than 77% compared with investment alternatives), Rolls-Royce has a reputation among professional investors that is far below that of its competitors. These are quite a few negative sentiment signals. One may want to trust the analysts that are changing their opinions. They may be early indications of better times, especially if the company is a smaller one. But If they are an extra large company, they should have more professional stockholders than are currently present. ...read more
Value Strategy: Rolls-Royce Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 37 (worse than 63% compared with alternatives), Rolls-Royce shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators where three out of four are below average for Rolls-Royce. Only the Price-to-Book Capital ratio (also referred to as market-to-book ratio) indicates good stock value with a Price-to-Book Rank of 97, which means that the stock price is lower compared with invested capital than for 97% of comparable investments. All other value indicators are below the market median. Price-to-Sales is 38 which means the stock price compared with what market professionals expect for future profits is higher than 62% of comparable companies, indicating a low value concerning Rolls-Royce's revenue levels. The same is valid for the Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Book Rank of 97 and for the dividend yields rank which is lower than for 84% of comparable companies, making the stock more expensive as regards to with the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 37, is a HOLD recommendation based on Rolls-Royce's stock price compared with the company's operational size and dividend yields. Why are market participants paying such a high price for Rolls-Royce, where three out of four value indicators are below par? One reason could be that the company is well financed, indicated by the high book capital level, and has a promising future that is not yet visible in reported revenues and profits. That would also explain the low dividend yield because the company needs the cash to invest in its future. If investors can verify a picture in this sense, the stock may still be a good investment, even though current company-reported financials don't fully explain current stock prices. ...read more
Growth Strategy: Rolls-Royce Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 99 (better than 99% compared with alternatives) for 2023, Rolls-Royce 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 four indicators above average for Rolls-Royce. Sales Growth has a value of 60, which means that, currently, professionals expect the company to grow more than 60% of its competitors. The same is valid for Profit Growth with a value of 96 and for Capital Growth with 76. In addition, Stock Returns had an above-average rank value of 99, which means they have been higher than 99% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 99, is a BUY recommendation for growth and momentum investors. Since all Growth Ranks are positive, Rolls-Royce exhibits above-average growth momentum. This could be due to a uniquely strong market position, proprietary technology, or an extensive corporate acquisition strategy. Growth investors will find this an attractive investment opportunity, unless they expect that the current phase is transitory and will deteriorate in the future. The current performance could also be a temporary recovery from a very low point, such as a turn-around situation. In the case of a turn-around, the current performance may or may not be followed by a continuing positive development. ...read more
Safety Strategy: Rolls-Royce Debt Financing Safety below-average
| SAFETY METRICS | June 22, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 45 |
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| REFINANCING | ||||||||
| REFINANCING | 52 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 18 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 32 |
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ANALYSIS: With an Obermatt Safety Rank of 32 (better than 32% compared with alternatives), the company Rolls-Royce 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 Rolls-Royce 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 Rolls-Royce and the other two below average. Refinancing is at 52, meaning the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 52% of its competitors. But Leverage is high with a rank of 45, meaning the company has an above-average debt-to-equity ratio. It has more debt than 55% of its competitors. Liquidity is also on the riskier side with a rank of 18, meaning the company generates less profit to service its debt than 82% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 32 (worse than 68% compared with alternatives), Rolls-Royce has a financing structure that is riskier than that of its competitors. A good Refinancing Rank means that the problems of the company may not be around the corner. But high Leverage is only good if things go well, and low Liquidity is a signal for caution. The financing signals for Rolls-Royce are on the riskier side, requiring the company's future to be on the safer side. Investors may want to look at Growth and Sentiment ranks before making an investment decision. ...read more
Combined financial peformance: Rolls-Royce Above-Average Financial Performance
| COMBINED PERFORMANCE | June 22, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 37 |
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| GROWTH | ||||||||
| GROWTH | 99 |
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| SAFETY | ||||||||
| SAFETY | 18 |
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| COMBINED | ||||||||
| COMBINED | 68 |
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ANALYSIS: With an Obermatt Combined Rank of 68 (better than 68% compared with investment alternatives), Rolls-Royce (Aerospace & Defense, United Kingdom) shares have above-average financial characteristics compared with similar stocks. Shares of Rolls-Royce are low in value (priced high) with a consolidated Obermatt Value Rank of 37 (worse than 63% of alternatives), and are riskily financed (Safety Rank of 32, which means above-average debt burdens) but show above-average growth (Growth Rank of 99). ...read more
RECOMMENDATION: An Obermatt Combined Rank of 68, is a buy recommendation based on Rolls-Royce's financial characteristics. As the company Rolls-Royce shows low value with an Obermatt Value Rank of 37 (63% of comparable investments are less expensive), investors should look at the other ranks. In this case, growth is expected to be above-average, better than 99% of comparable companies (Obermatt Growth Rank is 99). This is a typical case. Companies with above average growth tend to cost more than stocks with slower growth expectations. If this is a high-growth company, the low Obermatt Safety Rank of 32 is a good sign. The more debt a well-performing company has, the higher the returns to shareholders. However, if growth turns negative or interest rates increase, high debt may become a burden. If you believe the future is bright for Rolls-Royce, even a low-value company (in terms of its key financial indicators) can be a good investment. ...read more
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