Fact based stock research
Serco (LSE:SRP)

GB0007973794

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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.

Serco stock research in summary

serco.com

ANALYSIS: With an Obermatt Combined Rank of 61 (better than 61% compared with investment alternatives), Serco (Facility Services, United Kingdom) shares have above-average financial characteristics compared with similar stocks. Shares of Serco are low in value (priced high) with a consolidated Value Rank of 49 (worse than 51% of alternatives). But they show above-average growth (Growth Rank of 56) and are safely financed (Safety Rank of 58, which means below-average debt burdens). ...read more

RECOMMENDATION: A Combined Rank of 61, is a buy recommendation based on Serco's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company Serco exhibits low value (Obermatt Value Rank of 49), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 56). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 58) 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). Obermatt Premium subscribers can further check the stock’s Sentiment Ranks, which also flow into the Obermatt 360° View for investors. ...read more

Latest Obermatt Ranks


360° View^new
Sentiment Rank^new
Value Rank	49
Growth Rank	56
Safety Rank	58
Combined Rank	61

Country	United Kingdom
Industry	Facility Services
Index	FTSE All Shares, FTSE 250, FTSE 350, Employee Focus EU
Size class	X-Large

2-May-2024. Stock data may be delayed. Log in or sign up to get the most recent research.

Further information

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Review the performance ranks of the individual metrics that form each investment strategy.

Research History: Serco

RESEARCH HISTORY	2021	2022	2023	2024
VALUE
VALUE	61	57	57	49
GROWTH
GROWTH	26	23	43	56
SAFETY
SAFETY	28	51	55	58
SENTIMENT
SENTIMENT	n/a	98	90	^new
360° VIEW
360° VIEW	n/a	67	64	^new

Most recent update of the stock research: 2-May-2024. Financial reporting date used for calculating ranks: 31-Dec-2023. Stock research history is based on the Obermatt Method. The higher the rank, the better Serco is in the corresponding investment strategy.
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Combined financial peformance in Detail

RESEARCH HISTORY	2021	2022	2023	2024
VALUE
VALUE	61	57	57	49
GROWTH
GROWTH	26	23	43	56
SAFETY
SAFETY	28	51	55	58
COMBINED
COMBINED	39	37	51	61

Last update of combined financial performance: 2-May-2024. Stock analysis on combined financial performance: The higher the rank of Serco the better the performance.

Value Metrics in Detail

ANALYSIS: With an Obermatt Value Rank of 49 (worse than 51% compared with alternatives), Serco shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, where half the indicators are below and half above average for Serco. Price-to-Sales (P/S) is 74, which means that the stock price compared with what market professionals expect for future sales is lower than for 74% of comparable companies, indicating a good value concerning Serco's revenue size. The same is valid for dividend yields with a Dividend Yield rank of 51, which means that dividends are expected to be higher than for 51% of comparable investments. On the other hand, the Price-to-Book Capital ratio (also referred to as market-to-book ratio) is less favorable than for 54% of alternatives (only 46% of peers have an even higher ratio). The same is valid for the Price-to-Profit (or Price / Earnings, P/E) ratio, which is higher than for 57% of comparable companies, making the stock more expensive compared with the company's expected profit levels. ...read more

RECOMMENDATION: The overall picture with a consolidated Value Rank of 49, is a hold recommendation based on Serco's stock price compared with the company's operational size and dividend yields. This is a somewhat surprising picture, because it means that profits are low while dividends are high. One interpretation could be that profits are expected to increase, justifying the high dividend payments. But it could also mean that the company desperately keeps the high dividends to avoid a collapsing share price. This would be a rather dangerous constellation. We recommend further analyzing the stock with Obermatt’s Value, Safety, and Sentiment Ranks, including the 360° View, before making an investment decision, which is especially important in this case, as the financial indicators are inconclusive. ...read more

VALUE METRICS	2021	2022	2023	2024
PRICE VS. REVENUES (P/S)
PRICE VS. REVENUES (P/S)	78	81	72	74
PRICE VS. PROFITS (P/E)
PRICE VS. PROFITS (P/E)	89	45	57	43
PRICE VS. CAPITAL (Market-to-Book)
PRICE VS. CAPITAL (Market-to-Book)	50	67	54	46
DIVIDEND YIELD
DIVIDEND YIELD	48	39	48	51
CONSOLIDATED RANK: VALUE
CONSOLIDATED RANK: VALUE	61	57	57	49

Last update of Value Rank: 2-May-2024. Stock analysis on value ratios: The higher the rank, the lower the value ratio of Serco; except for dividend yield where the rank is higher, the higher the yield.

Growth Metrics in Detail

ANALYSIS: With an Obermatt Growth Rank of 56 (better than 56% compared with alternatives), Serco shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Serco. Capital Growth has a rank of 98, which means that currently professionals expect the company to grow its invested capital more than 9% of its competitors. Investors welcomed this, visible in the Stock Returns rank of 65 (above 65% of alternative investments). But Sales Growth has only a rank of 37, which means that, currently, professionals expect the company to grow less than 63% of its competitors, and Profit Growth is also low at a rank of 9. ...read more

RECOMMENDATION: The overall picture with a consolidated Growth Rank of 56, is a buy recommendation for growth and momentum investors. This is an ambiguous picture. Revenue growth and capital growth are strong, but the growth in profit, which seems good, can also be an indication that growth momentum may be negative. The fact that stock returns have been above average doesn't help much, as stock returns are less reliable in showing a company’s future growth potential. Prices may perform well for the simple reason that investors were too pessimistic in the past and are now correcting their opinions and moving the stock price to a more reasonable level. As the growth picture is mixed for Serco, investors may want to look at value and sentiment indicators for a well-rounded picture of this stock. While momentum is a popular investment factor, the value aspect might be the more important one, in the longer term. We recommend analyzing the stock with Obermatt’s Value, Safety, and Sentiment Ranks to arrive at a 360° View of the stock purchase case, especially since the growth performance is mixed here. ...read more

GROWTH METRICS	2021	2022	2023	2024
REVENUE GROWTH
REVENUE GROWTH	52	4	12	37
PROFIT GROWTH
PROFIT GROWTH	7	58	34	9
CAPITAL GROWTH
CAPITAL GROWTH	n/a	56	90	98
STOCK RETURNS
STOCK RETURNS	32	27	49	65
CONSOLIDATED RANK: GROWTH
CONSOLIDATED RANK: GROWTH	26	23	43	56

Last update of Growth Rank: 2-May-2024. Stock analysis on growth metrics: The higher the rank, the higher the growth and returns of Serco.

Safety Metrics in Detail

ANALYSIS: With an Obermatt Safety Rank of 58 (better than 58% compared with alternatives), the company Serco 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 Serco 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 Serco. Leverage is at a rank of 67, meaning the company has a below-average debt-to-equity ratio. It has less debt than 67% of its competitors. Liquidity is also good at a rank of 63, meaning the company generates more profit to service its debt than 63% of its competitors. This indicates that the company is on the safer side when it comes to debt service. But Refinancing is lower at a rank of 22, 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 78% of its competitors. ...read more

RECOMMENDATION: With a consolidated Safety Rank of 58 (better than 58% compared with alternatives), Serco has a financing structure that is safer than that of its competitors. The refinancing issues could be a short-term problem, especially if the company has reputation issues. Banks and investors don't like to refinance debt if there are clouds on the horizon. For this reason, investors should look at the refinancing environment for Serco. Does it look safe that debt that is coming due can be covered with new debt? If that is the case, then the financing situation of the company is on the safer side. If not, it may be better to wait until refinancing has been completed and the Refinancing rank is good again. Investors may have a short-term debt challenge with Serco and should also compare Obermatt’s Value, Growth, and Sentiment Ranks before making a decision. ...read more

SAFETY METRICS	2021	2022	2023	2024
LEVERAGE
LEVERAGE	35	50	62	67
REFINANCING
REFINANCING	40	23	13	22
LIQUIDITY
LIQUIDITY	41	57	67	63
CONSOLIDATED RANK: SAFETY
CONSOLIDATED RANK: SAFETY	28	51	55	58

Last update of Safety Rank: 2-May-2024. Stock analysis on safety metrics: The higher the rank, the lower the leverage of Serco and the more cash is available to service its debt.

Sentiment Metrics in Detail

SENTIMENT	2021	2022	2023	2024
ANALYST OPINIONS
ANALYST OPINIONS	n/a	64	86	^new
OPINIONS CHANGE
OPINIONS CHANGE	n/a	40	39	^new
PRO HOLDINGS
PRO HOLDINGS	n/a	86	94	^new
MARKET PULSE
MARKET PULSE	n/a	83	76	^new
CONSOLIDATED RANK: SENTIMENT
CONSOLIDATED RANK: SENTIMENT	n/a	98	90	^new

Last update of Sentiment Rank: 2-May-2024. Stock analysis on sentiment metrics: The higher the rank, the more positive the sentiment for Serco.
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