June 20, 2024
Top 10 Stock South32 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: South32 – Top 10 Stock in Australian Securities Exchange Index ASX 50
South32 is listed as a top 10 stock on June 20, 2024 in the market index ASX 50 because of its high performance in at least one of the Obermatt investment strategies. While only half of the consolidated Obermatt Ranks exhibit above-average performance, the professional market sentiment is positive and it may be a solid investment proposition, especially if a growth recovery is to be expected soon. Based on the Obermatt 360° View of 44 (44% performer), Obermatt assesses an overall hold recommendation for South32 on June 20, 2024.
Snapshot: Obermatt Ranks
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 South32 Hold
| 360 METRICS | June 20, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 51 |
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| GROWTH | ||||||||
| GROWTH | 27 |
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| SAFETY | ||||||||
| SAFETY | 35 |
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| SENTIMENT | ||||||||
| SENTIMENT | 92 |
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| 360° VIEW | ||||||||
| 360° VIEW | 44 |
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ANALYSIS: With an Obermatt 360° View of 44 (better than 44% compared with alternatives), overall professional sentiment and financial characteristics for the stock South32 are below the industry average. The 360° View is based on consolidating four consolidated indicators, with half the metrics below and half above average for South32. The consolidated Value Rank has an attractive rank of 51, which means that the share price of South32 is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is lower than for 51% of alternative stocks in the same industry. The consolidated Sentiment Rank has a good rank of 92, which means that professional investors are more optimistic about the stock than for 92% of alternative investment opportunities. But the consolidated Growth Rank has a low rank of 27, which means that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth, and stock returns. The consolidated Safety Rank has a riskier rank of 35, meaning the company has a riskier financing structure than 65 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 44, South32 is worse than 56% of all alternative stock investment opportunities based on the Obermatt Method. Half of the consolidated Obermatt Ranks exhibit above-average performance, but the other half are below market levels. The company enjoys a good value (Value Rank of 51) and positive market sentiment in the professional investor community (Sentiment Rank of 92), but growth expectations are below-average (Growth Rank of 27) and the financing structure is on the risky side(Safety Rank of 35). This combination is rather dangerous, because high debt levels (low safety) require growth to finance the debt burden. The current low growth level may be temporary, because professionals are actually optimistic (positive sentiment). Good value is sometimes an indication that the company's future is challenging. The below-par growth performance may be the reason for this assessment. Companies with less growth typically have a lower price than fast-growing competitors. Even though professional investor sentiment is strong, we recommend further evaluating whether the future of South32 is as challenging as the stock's low price suggests. Since the professional community is optimistic, the stock might just be going through a more challenging phase now, indicating that timing might be good now. ...read more
Sentiment Strategy: Professional Market Sentiment for South32 very positive
ANALYSIS: With an Obermatt Sentiment Rank of 92 (better than 92% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock South32 is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for South32. Analyst Opinions are at a rank of 76 (better than 76% of alternative investments), which means that currently, stock research analysts tend to recommend a stock investment in the company. In addition, Analyst Opinions Change has a rank of 80, which means that currently, stock research experts are getting even more optimistic. Obermatt Market Pulse further supports this with a rank of 84, which means that the current professional news and professional social networks are generally positive when discussing this company (more positive news than for 84% of competitors). But there are few stock holdings by institutional investors. The Professional Investors rank is low at 48, which means that currently, professional investors hold less stock in this company than in 52% of alternative investment opportunities. Pros tend to invest in other companies. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 92 (more positive than 92% compared with investment alternatives), South32 has a reputation among professional investors that is significantly higher than that of its competitors. Not having too many professionals invested in South32 may be less of an issue, especially if the stock is from a smaller company where professionals typically invest less. It is natural for professional investors to focus on large and extra-large companies, as they provide more safety. Smaller companies attract fewer professionals in the shareholder community. Overall, the signals from the professionals are still quite favorable for investments in South32. ...read more
Value Strategy: South32 Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 51 (better than 51% compared with alternatives), South32 shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for South32. Expected dividend yields are higher than for 68% of comparable companies (a Dividend Yield rank of 68), making the stock attractive. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 55, which means that the stock price is lower compared with invested capital than for 55% of comparable investments. But in respect to sales and profits, the picture is reversed. Price-to-Sales is 40 which means that the stock price compared with what market professionals expect for future profits is higher than for 60% of comparable companies, indicating a low value concerning South32's sales levels. The Price-to-Profit ratio (also referred to as price-earnings (P/E) ratio) is also unfavorable for South32 with a rank of 30. This means that the stock price, compared with what market professionals expect for future profits, is higher than for 70% of comparable companies, indicating a low value concerning South32's profit levels. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 51, is a buy recommendation based on South32's stock price compared with the company's operational size and dividend yields. The company seems confident that it can generate a reasonable return on invested capital, because it pays an above-average dividend while profits are below what you would expect for a company with this stock price. If you agree with this practice and believe that profits will return to higher levels, as the current dividend policy suggests, South32 may be an attractive investment. If this is not the case, you may want to be careful with this stock as it is also expensive compared with its expected revenue levels. ...read more
Growth Strategy: South32 Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 27 (better than 27% compared with alternatives), South32 shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for South32. Sales Growth has a rank of 53 which means that currently, professionals expect the company to grow more than 53% of its competitors. Capital Growth is also above 11% of competitors with a rank of 77. But Profit Growth only has a rank of 11, which means that currently professionals expect the company to grow its profits less than 89% of its competitors. And Stock Returns have also been below average with a rank of only 28. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 27, is a hold recommendation for growth and momentum investors. Profits are sometimes low if the company invests in the future. The positive revenue and capital investment outlook confirms such an interpretation. Both revenues and capital are solid growth indicators, and lower profits in such a case would be encouraging. But the investors see it differently by punishing the share price. Sometimes, Mister Market is not very reliable, because it is not uncommon for it to be volatile. Investors should look out for signs of growth expenditure that could justify low profit growth, and they may also find reasons why recent stock price developments don't confirm the growth outlook of operations. While operating growth indicators are not perfect, they are more reliable indicators for future performance than stock prices that can repeatedly surprise investors. ...read more
Safety Strategy: South32 Debt Financing Safety below-average
| SAFETY METRICS | June 20, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 53 |
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| REFINANCING | ||||||||
| REFINANCING | 37 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 49 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 35 |
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ANALYSIS: With an Obermatt Safety Rank of 35 (better than 35% compared with alternatives), the company South32 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 South32 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 South32 and the other two below average. Leverage is at a rank of 53 meaning the company has a below-average debt-to-equity ratio. It has less debt than 53% of its competitors.Refinancing is at a rank of 37, which means that the portion of the debt about to be refinanced is above-average. It has more debt in the refinancing stage than 63% of its competitors. Liquidity is at a rank of 49, meaning that the company generates less profit to service its debt than 51% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 35 (worse than 65% compared with alternatives), South32 has a financing structure that is riskier than that of its competitors. This is an indication that the company is on the riskier side when it comes to debt service. There is only below-market average liquidity, and a short-term refinancing issue might be around the corner. But in the long-term, the debt levels of South32 are on the safer side. ...read more
Combined financial peformance: South32 Lowest Financial Performance
| COMBINED PERFORMANCE | June 20, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 51 |
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| GROWTH | ||||||||
| GROWTH | 27 |
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| SAFETY | ||||||||
| SAFETY | 49 |
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| COMBINED | ||||||||
| COMBINED | 20 |
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ANALYSIS: With an Obermatt Combined Rank of 20 (worse than 80% compared with investment alternatives), South32 (Diversified Metals & Mining, Australia) shares have lower financial characteristics compared with similar stocks. Shares of South32 are a good value (attractively priced) with a consolidated Value Rank of 51 (better than 51% of alternatives) but show below-average growth (Growth Rank of 27), and are riskily financed (Safety Rank of 35), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 20, is a sell recommendation based on South32's financial characteristics. As the company South32's key financial metrics exhibit good value (Obermatt Value Rank of 51) but low growth (Obermatt Growth Rank of 27) and risky financing practices (Obermatt Safety Rank of 35), it may be a risky investment, because debt in times of crises can make things worse. The good value, better than 51% of comparable companies, may indicate the company's future is challenging. If you believe that low growth is temporary or just due to a specific current event, you may conclude that the good value of the stock provides an attractive investment opportunity. ...read more
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