March 14, 2024
Top 10 Stock Softcat 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: Softcat – Top 10 Stock in Customer Satisfaction Leaders in Europe
Softcat is listed as a top 10 stock on March 14, 2024 in the market index Customer Focus EU because of its high performance in at least one of the Obermatt investment strategies. Three consolidated Obermatt Ranks are above-average. Only the Value Rank is below average. The investment rationale may be an investment in future growth, supported by professional market opinion. Based on the Obermatt 360° View of 85 (top 85% performer), Obermatt assesses an overall strong buy recommendation for Softcat on March 14, 2024.
Snapshot: Obermatt Ranks
| Country | United Kingdom |
| Industry | IT Consulting & oth. Services |
| Index | FTSE All Shares, FTSE 250, FTSE 350, Customer Focus EU, Dividends Europe, Employee Focus EU, Diversity Europe |
| Size class | 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 Softcat Strong Buy
| 360 METRICS | March 14, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 14 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 100 |
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| SENTIMENT | ||||||||
| SENTIMENT | 68 |
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| 360° VIEW | ||||||||
| 360° VIEW | 85 |
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ANALYSIS: With an Obermatt 360° View of 85 (better than 85% compared with alternatives) for 2024, overall professional sentiment and financial characteristics for the stock Softcat are very positive. The 360° View is based on consolidating four consolidated indicators, with all but one indicator above average for Softcat. The consolidated Growth Rank has a good rank of 95, 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 95% of competitors in the same industry. The consolidated Safety Rank at 100 means that the company has a financing structure that is safer than 100% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. Finally, the consolidated Sentiment Rank has a good rank of 68, which means that professional investors are more optimistic about the stock than for 68% of alternative investment opportunities. But the consolidated Value Rank is less desirable at 14, meaning that the share price of Softcat is on the higher side compared with indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 86% of alternative stocks in the same industry. ...read more
RECOMMENDATION: With a consolidated 360° View of 85, Softcat is better positioned than 85% of all alternative stock investment opportunities based on the Obermatt Method. As three out of four consolidated Obermatt Ranks exhibit excellent performance, such as above-average growth (Growth Rank of 95), a safe financing structure (Safety Rank of 100), and positive professional market sentiment (Sentiment Rank of 68), it is a solid stock investment where growth may be the strongest driver of the investment rationale, also reflected by institutional investors. 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 more do you pay for the stock of Softcat compared with alternatives? You can use the following rule of thumb: The growth rank measures the growth momentum of the company (95% better than peers). The value rank could be the reverse reflection of that (5%). A Value Rank below that level may be assessed as expensive, a rank above that is still good value. Sometimes market sentiment just reflects the past, sometimes the 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 Softcat positive
ANALYSIS: With an Obermatt Sentiment Rank of 68 (better than 68% compared with alternatives), overall professional sentiment and engagement for the stock Softcat is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Softcat. Analyst Opinions are at a rank of 37 (worse than 63% 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 55, which indicates a shift in stock research experts opinions for the better. In other words, they are getting more optimistic about stock investments in Softcat. Even better, the Professional Investors rank is 68, meaning that professional investors hold more stock in this company than in 68% of alternative investment opportunities. Pros tend to favor investing in this company. Furthermore, Market Pulse has a rank of 91, which means that the current professional news and professional social networks are upbeat when discussing this company (more positive news than for 91% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 68 (more positive than 68% compared with investment alternatives), Softcat has a reputation among professional investors that is above-average compared with 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: Softcat Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 14 (worse than 86% compared with alternatives), Softcat shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with three out of four indicators below average for Softcat. Only the metric dividend yield has an above-average rank, reflecting that dividend practices are expected to be higher than 63% 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 9 which means that the stock price compared with what market professionals expect for future profits is higher than 91% of comparable companies, indicating a low value concerning Softcat's sales levels. The same is valid for Price-to-Profit (also referred to as price-earnings, P/E) with a rank of 17 which means that the stock price compared with what market professionals expect for future profit levels is higher than 83% of comparable companies. In addition, Price-to-Book (also referred to as market-to-book ratio) with a Price-to-Book Rank of 1 is also low. Compared with invested capital, the stock price is higher than for 99% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 14, is a sell recommendation based on Softcat's stock price compared with the company's operational size and dividend yields. Should dividend investors pick Softcat? 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 Softcat only if they reasonably expect the low current profit levels to be transitory. ...read more
Growth Strategy: Softcat Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 95 (better than 95% compared with alternatives) for 2024, Softcat 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 but one indicator above average for Softcat. Sales Growth has a rank of 85 which means that currently, professionals expect the company to grow more than 85% of its competitors. Capital Growth is also above 42% of competitors with a rank of 87, and Stock Returns with the rank of 93 is also an outperformance. Only Profit Growth is low with a rank of 42 which means that currently, professionals expect the company to grow its profits less than 58% of its competitors. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 95, 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, Softcat is a good growth stock. ...read more
Safety Strategy: Softcat Debt Financing Safety very solid
| SAFETY METRICS | March 14, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 94 |
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| REFINANCING | ||||||||
| REFINANCING | 47 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 97 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 100 |
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ANALYSIS: With an Obermatt Safety Rank of 100 (better than 100% compared with alternatives) for 2024, the company Softcat has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Softcat 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 Softcat. Leverage is at a rank of 94, meaning the company has a below-average debt-to-equity ratio. It has less debt than 94% of its competitors. Liquidity is also good at a rank of 97, meaning the company generates more profit to service its debt than 97% 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 47, 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 53% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 100 (better than 100% compared with alternatives), Softcat has a financing structure that is significantly 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 Softcat. 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. ...read more
Combined financial peformance: Softcat Top Financial Performance
| COMBINED PERFORMANCE | March 14, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 14 |
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| GROWTH | ||||||||
| GROWTH | 95 |
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| SAFETY | ||||||||
| SAFETY | 97 |
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| COMBINED | ||||||||
| COMBINED | 85 |
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ANALYSIS: With an Obermatt Combined Rank of 85 (better than 85% compared with investment alternatives), Softcat (IT Consulting & oth. Services, United Kingdom) shares have much better financial characteristics than comparable stocks. Shares of Softcat are low in value (priced high) with a consolidated Value Rank of 14 (worse than 86% of alternatives). But they show above-average growth (Growth Rank of 95) and are safely financed (Safety Rank of 100, which means below-average debt burdens). ...read more
RECOMMENDATION: A Combined Rank of 85, is a strong buy recommendation based on Softcat's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company Softcat exhibits low value (Obermatt Value Rank of 14), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 95). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 100) 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). ...read more
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