April 11, 2024
Top 10 Stock Shoprite 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: Shoprite – Top 10 Stock in Johannesburg Securities Exchange All Shares Index JSE All Shares
Shoprite is listed as a top 10 stock on April 11, 2024 in the market index JSE All Shares 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 65 (high 65% performer), Obermatt assesses an overall buy recommendation for Shoprite on April 11, 2024.
Snapshot: Obermatt Ranks
| Country | South Africa |
| Industry | Food Retail |
| Index | Low Emissions, Energy Efficient, JSE All Shares |
| 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 Shoprite Buy
| 360 METRICS | April 11, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 43 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 69 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 32 |
|
||||||
| SENTIMENT | ||||||||
| SENTIMENT | 75 |
|
||||||
| 360° VIEW | ||||||||
| 360° VIEW | 65 |
|
||||||
ANALYSIS: With an Obermatt 360° View of 65 (better than 65% compared with alternatives), overall professional sentiment and financial characteristics for the stock Shoprite are above average. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for Shoprite. The consolidated Growth Rank has a good rank of 69, 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 69% of competitors in the same industry. The consolidated Sentiment Rank also has a good rank of 75, which means that professional investors are more optimistic about the stock than for 75% of alternative investment opportunities. But the consolidated Value Rank has a less desirable rank of 43, which means that the share price of Shoprite 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 57% of alternative stocks in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 32, which means that the company has a financing structure that is riskier than those of 68% 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 65, Shoprite is better positioned than 65% 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 69), and professional market sentiment is positive (Sentiment Rank of 75), 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 Shoprite very positive
ANALYSIS: With an Obermatt Sentiment Rank of 75 (better than 75% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Shoprite is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Shoprite. Analyst Opinions are at a rank of 29 (worse than 71% 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 68, which indicates a shift in stock research experts opinions for the better. In other words, they are getting more optimistic about stock investments in Shoprite. Even better, the Professional Investors rank is 89, meaning that professional investors hold more stock in this company than in 89% of alternative investment opportunities. Pros tend to favor investing in this company. Furthermore, Market Pulse has a rank of 66, which means that the current professional news and professional social networks are upbeat when discussing this company (more positive news than for 66% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 75 (more positive than 75% compared with investment alternatives), Shoprite has a reputation among professional investors that is significantly higher than that of its competitors. While analysts are still critical of the company, some are changing their minds. In addition, the professional news channels are optimistic, and many institutional investors have already bought stock in the company. These are encouraging signals, despite the still lower level of analyst recommendations. They may be due to a problematic past, and about to change. The positive sentiment signals are stronger than the negative. ...read more
Value Strategy: Shoprite Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 43 (worse than 57% compared with alternatives), Shoprite 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 Shoprite. Price-to-Sales (P/S) is 66, which means that the stock price compared with what market professionals expect for future sales is lower than for 66% of comparable companies, indicating a good value concerning Shoprite's revenue size. The same is valid for dividend yields with a Dividend Yield rank of 58, which means that dividends are expected to be higher than for 58% 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 78% of alternatives (only 22% 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 54% 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 43, is a hold recommendation based on Shoprite'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. ...read more
Growth Strategy: Shoprite Growth Momentum good
ANALYSIS: With an Obermatt Growth Rank of 69 (better than 69% compared with alternatives), Shoprite 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 all but one indicator above average for Shoprite. Sales Growth has a rank of 77 which means that currently, professionals expect the company to grow more than 77% of its competitors. Capital Growth is also above 34% of competitors with a rank of 53, and Stock Returns with the rank of 73 is also an outperformance. Only Profit Growth is low with a rank of 34 which means that currently, professionals expect the company to grow its profits less than 66% of its competitors. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 69, is a buy recommendation for growth and momentum investors. All three operating growth indicators, namely revenue, profit, and capital growth, are showing improvements. This is a good indication of a company with a positive future. That might, at the same time, be the simple reason why profit growth is low. A growing company needs money and thus can't yet show high profit growth. Look out for signs in corporate communication about extra growth efforts costing time and money. If that is the case, Shoprite is a good growth stock. ...read more
Safety Strategy: Shoprite Debt Financing Safety below-average
| SAFETY METRICS | April 11, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| LEVERAGE | ||||||||
| LEVERAGE | 14 |
|
||||||
| REFINANCING | ||||||||
| REFINANCING | 55 |
|
||||||
| LIQUIDITY | ||||||||
| LIQUIDITY | 40 |
|
||||||
| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 32 |
|
||||||
ANALYSIS: With an Obermatt Safety Rank of 32 (better than 32% compared with alternatives), the company Shoprite 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 Shoprite 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 Shoprite and the other two below average. Refinancing is at 55, meaning the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 55% of its competitors. But Leverage is high with a rank of 14, meaning the company has an above-average debt-to-equity ratio. It has more debt than 86% of its competitors. Liquidity is also on the riskier side with a rank of 40, meaning the company generates less profit to service its debt than 60% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 32 (worse than 68% compared with alternatives), Shoprite 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 Shoprite 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: Shoprite Below-Average Financial Performance
| COMBINED PERFORMANCE | April 11, 2024 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 43 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 69 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 40 |
|
||||||
| COMBINED | ||||||||
| COMBINED | 37 |
|
||||||
ANALYSIS: With an Obermatt Combined Rank of 37 (worse than 63% compared with investment alternatives), Shoprite (Food Retail, South Africa) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Shoprite are low in value (priced high) with a consolidated Value Rank of 43 (worse than 57% of alternatives), and are riskily financed (Safety Rank of 32, which means above-average debt burdens) but show above-average growth (Growth Rank of 69). ...read more
RECOMMENDATION: A Combined Rank of 37, is a hold recommendation based on Shoprite's financial characteristics. As the company Shoprite shows low value with an Obermatt Value Rank of 43 (57% 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 69% of comparable companies (Obermatt Growth Rank is 69). 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 Shoprite, even a low-value company (in terms of its key financial indicators) can be a good investment. ...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.