September 5, 2024
Top 10 Stock Rolls-Royce 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: Rolls-Royce – Top 10 Stock in SDG 16: Peace Justice and Strong Institutions
Rolls-Royce is listed as a top 10 stock on September 05, 2024 in the market index SDG 16 because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is growing above average and 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 68 (high 68% performer), Obermatt assesses an overall buy recommendation for Rolls-Royce on September 05, 2024.
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 Buy
| 360 METRICS | September 5, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 29 |
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| GROWTH | ||||||||
| GROWTH | 85 |
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| SAFETY | ||||||||
| SAFETY | 18 |
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| SENTIMENT | ||||||||
| SENTIMENT | 100 |
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| 360° VIEW | ||||||||
| 360° VIEW | 68 |
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ANALYSIS: With an Obermatt 360° View of 68 (better than 68% compared with alternatives), overall professional sentiment and financial characteristics for the stock Rolls-Royce are above average. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for Rolls-Royce. The consolidated Growth Rank has a good rank of 85, 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 85% of competitors in the same industry. The consolidated Sentiment Rank also has a good rank of 100, which means that professional investors are more optimistic about the stock than for 100% of alternative investment opportunities. But the consolidated Value Rank has a less desirable rank of 29, which means that the share price of Rolls-Royce is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 71% of alternative stocks in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 18, which means that the company has a financing structure that is riskier than those of 82% 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 68, Rolls-Royce is better positioned than 68% of all alternative stock investment opportunities based on the Obermatt Method. Only half of the consolidated Obermatt Ranks exhibit excellent performance, so one needs to take a close look. Growth is above-average (Growth Rank of 85), and professional market sentiment is positive (Sentiment Rank of 100), but value and safety are below average. The Safety Rank is the least significant of the four consolidated ranks, because it only reflects financing practices. In the case of high growth, aggressive financing is a good thing. So the question is: How to assess below-average value against above-average growth and sentiment? Growth may be the strongest driver of the investment rationale in this case, which is reflected in institutional investors' opinions. It is typical for growth companies to have low value, as is the case here. Investors are willing to pay more for companies that outperform their competitors. So the question is, how much do you sacrifice value for growth? You can use the following rule of thumb: If you take 100 minus the growth rank, you arrive at a possibly minimum level for the value 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 growth rank is above 60. Sometimes market sentiment just extrapolates the past, but sometimes it reflects reality. You pay more than the market average for this stock, but it may be worth it. ...read more
Sentiment Strategy: Professional Market Sentiment for Rolls-Royce very positive
ANALYSIS: With an Obermatt Sentiment Rank of 100 (better than 100% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Rolls-Royce is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for Rolls-Royce. Analyst Opinions are at a rank of 68 (better than 68% 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 88, 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 Rolls-Royce. The Professional Investors rank is 95, which means that currently, professional investors hold more stock in this company than in 95% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 80 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 80% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 100 (more positive than 100% compared with investment alternatives), Rolls-Royce 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 Rolls-Royce 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: Rolls-Royce Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 29 (worse than 71% 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 100, which means that the stock price is lower compared with invested capital than for 100% of comparable investments. All other value indicators are below the market median. Price-to-Sales is 9 which means the stock price compared with what market professionals expect for future profits is higher than 91% 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 100 and for the dividend yields rank which is lower than for 74% 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 29, 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
| GROWTH METRICS | September 5, 2024 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 59 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 76 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 65 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 97 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 85 |
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ANALYSIS: With an Obermatt Growth Rank of 85 (better than 85% compared with alternatives) for 2024, 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 59, which means that, currently, professionals expect the company to grow more than 59% of its competitors. The same is valid for Profit Growth with a value of 76 and for Capital Growth with 65. In addition, Stock Returns had an above-average rank value of 97, which means they have been higher than 97% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 85, 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 risky
| SAFETY METRICS | September 5, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 1 |
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| REFINANCING | ||||||||
| REFINANCING | 44 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 42 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 18 |
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ANALYSIS: With an Obermatt Safety Rank of 18 (better than 18% compared with alternatives), the company Rolls-Royce has much riskier financing practices than comparable other companies, which means that their overall debt burden is significantly 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 all three metrics below average for Rolls-Royce. Liquidity is at 42, meaning that the company generates less profit to service its debt than 58% of its competitors. This indicates that the company is on the riskier side when it comes to debt service. Even worse, Leverage is at a rank of 1, meaning the company has an above-average debt-to-equity ratio. It has more debt than 99% of its competitors. Finally, Refinancing is at a rank of 44 which means that the portion of the debt about to be refinanced is above average. It has more debt in the refinancing stage than 56% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 18 (worse than 82% compared with alternatives), Rolls-Royce has a financing structure that is significantly riskier than that of its competitors. This combination is rather dangerous in most situations. Only very promising companies with bright future outlooks and stellar reputations can operate with such risky financing.
Combined financial peformance: Rolls-Royce Below-Average Financial Performance
| COMBINED PERFORMANCE | September 5, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 29 |
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| GROWTH | ||||||||
| GROWTH | 85 |
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| SAFETY | ||||||||
| SAFETY | 42 |
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| COMBINED | ||||||||
| COMBINED | 36 |
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ANALYSIS: With an Obermatt Combined Rank of 36 (worse than 64% compared with investment alternatives), Rolls-Royce (Aerospace & Defense, United Kingdom) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Rolls-Royce are low in value (priced high) with a consolidated Value Rank of 29 (worse than 71% of alternatives), and are riskily financed (Safety Rank of 18, which means above-average debt burdens) but show above-average growth (Growth Rank of 85). ...read more
RECOMMENDATION: A Combined Rank of 36, is a hold recommendation based on Rolls-Royce's financial characteristics. As the company Rolls-Royce shows low value with an Obermatt Value Rank of 29 (71% 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 85% of comparable companies (Obermatt Growth Rank is 85). 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 18 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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