June 22, 2023
Top 10 Stock Tesco 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: Tesco – Top 10 Stock in FTSE 100 Index
Tesco is listed as a top 10 stock on June 22, 2023 in the market index FTSE 100 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 55 (high 55% performer), Obermatt assesses an overall buy recommendation for Tesco on June 22, 2023.
Snapshot: Obermatt Ranks
| Country | United Kingdom |
| Industry | Food Retail |
| Index | FTSE All Shares, FTSE 100, FTSE 350, Dividends Europe, Employee Focus EU, Human Rights, Low Waste, Renewables Users |
| 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 Tesco Buy
| 360 METRICS | June 22, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 90 |
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| GROWTH | ||||||||
| GROWTH | 27 |
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| SAFETY | ||||||||
| SAFETY | 22 |
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| SENTIMENT | ||||||||
| SENTIMENT | 68 |
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| 360° VIEW | ||||||||
| 360° VIEW | 55 |
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ANALYSIS: With an Obermatt 360° View of 55 (better than 55% compared with alternatives), overall professional sentiment and financial characteristics for the stock Tesco are above average. The 360° View is based on consolidating four consolidated indicators, with half the metrics below and half above average for Tesco. The consolidated Value Rank has an attractive rank of 90, which means that the share price of Tesco 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 90% of alternative stocks in the same industry. 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 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 22, meaning the company has a riskier financing structure than 78 comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. ...read more
RECOMMENDATION: With a 360° View of 55, Tesco is better positioned than 55% 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 90) and positive market sentiment in the professional investor community (Sentiment Rank of 68), but growth expectations are below-average (Growth Rank of 27) and the financing structure is on the risky side(Safety Rank of 22). 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 (high 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 Tesco 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 Tesco positive
ANALYSIS: With an Obermatt Sentiment Rank of 68 (better than 68% compared with alternatives), overall professional sentiment and engagement for the stock Tesco is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Tesco. Analyst Opinions are at a rank of 77 (better than 77% 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 62, which means that stock research experts are changing their opinions for the better in recommending investing in the company. In other words, they are getting even more optimistic about investments in Tesco. Finally, the Professional Investors rank is 61, which means that currently, professional investors hold more stock in this company than in 61% of alternative investment opportunities. ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 68 (more positive than 68% compared with investment alternatives), Tesco has a reputation among professional investors that is above-average compared with that of its competitors. Pros tend to favor investing in this company. But there is also a signal for caution. Market Pulse has a rank of 37, which means that the current professional news and professional social networks tend to be negative when discussing this company (more negative news than for 63% of competitors). This could mean future risks and should make investors careful. Attention to negative news for Tesco is worthwhile because they may be early warning signals. Without those, all other professional signals are encouraging, especially since analysts are getting more optimistic. ...read more
Value Strategy: Tesco Stock Price Value at the top
ANALYSIS: With an Obermatt Value Rank of 90 (better than 90% compared with alternatives) for 2023, Tesco shares are significantly less expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with three out of four indicators above average for Tesco. Price-to-Sales (P/S) is 73, which means that the stock price compared with what market professionals expect for future sales is lower than for 73% of comparable companies, indicating a good value concerning Tesco's revenue size. The same is valid for expected Price-to-Profits (or Price / Earnings, P/E), more favorable than for 61% of alternatives. It is also positive for expected dividend yields with a Dividend Yield rank of 85 (dividends are expected to be higher than 85% of other stocks). But, compared with other companies in the same industry, the Price-to-Book Capital ratio (also referred to as market-to-book ratio) is higher than average, making the stock more expensive. Only 52% of all competitors have an even higher price compared with book capital which puts the Price-to-Capital Rank for Tesco to 48. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 90, is a strong buy recommendation based on Tesco's stock price compared with the company's operational size and dividend yields. A low level of book capital means that the company has a business that is leaner in assets than its competitors. For instance, the company could be leasing its production facilities or be more focussed on intellectual property, such as its brand and software, which is less visible in its book capital. If that is the case, the three good value ranks for Sales, Profits, and Dividends are reliable indicators for the stock price value. ...read more
Growth Strategy: Tesco Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 27 (better than 27% compared with alternatives), Tesco 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 three out of four indicators below average for Tesco. Sales Growth has a below market rank of 14, which means that, currently, professionals expect the company to grow less than 86% of its competitors. The same is valid for Capital Growth, with a rank of 39, and Profit Growth, with a rank of 40. Currently, professionals expect the company to grow its profits less than 60% of its competitors). Only shareholders are optimistic. Stock Returns are above average at a rank of 65, which means that the stock returns have recently been above 65% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 27, is a HOLD recommendation for growth and momentum investors. That picture may be the result for a company that has reached the bottom. All went south for Tesco, and it still looks bad, but some investors already see light at the end of the tunnel, rewarding the stock with recent above-market stock returns. It could also mean that investors are correcting an overreaction to negative news. If that were the case, the positive stock returns are not yet a sign of recovery. Investors should look closely at the Value and Sentiment indicators before they make a stock purchasing decision, because growth is unlikely to be the driving argument behind this investment. ...read more
Safety Strategy: Tesco Debt Financing Safety risky
| SAFETY METRICS | June 22, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 30 |
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| REFINANCING | ||||||||
| REFINANCING | 13 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 56 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 22 |
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ANALYSIS: With an Obermatt Safety Rank of 22 (better than 22% compared with alternatives), the company Tesco 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 Tesco 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 Tesco. Liquidity is at 56, meaning the company generates more profit to service its debt than 56% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier at a rank of 13, 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 87% of its competitors. Leverage is also high at a rank of 30, which means that the company has an above-average debt-to-equity ratio. It has more debt than 70% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 22 (worse than 78% compared with alternatives), Tesco has a financing structure that is significantly riskier than that of its competitors. High Leverage (a low Obermatt Leverage Rank) is good in good times, because it usually indicates that shareholders get higher returns. The good Liquidity performance of the company is an indicator that this is the case. However, if you expect an economic downturn, you may stay clear of this stock because they have an above-average debt level that needs refinancing soon. ...read more
Combined financial peformance: Tesco Below-Average Financial Performance
| COMBINED PERFORMANCE | June 22, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 90 |
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| GROWTH | ||||||||
| GROWTH | 27 |
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| SAFETY | ||||||||
| SAFETY | 56 |
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| COMBINED | ||||||||
| COMBINED | 37 |
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ANALYSIS: With an Obermatt Combined Rank of 37 (worse than 63% compared with investment alternatives), Tesco (Food Retail, United Kingdom) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Tesco are a good value (attractively priced) with a consolidated Obermatt Value Rank of 90 (better than 90% of alternatives) but show below-average growth (Growth Rank of 27), and are riskily financed (Safety Rank of 22), which means above-average debt burdens. ...read more
RECOMMENDATION: An Obermatt Combined Rank of 37, is a hold recommendation based on Tesco's financial characteristics. As the company Tesco's key financial metrics exhibit good value (Obermatt Value Rank of 90) but low growth (Obermatt Growth Rank of 27) and risky financing practices (Obermatt Safety Rank of 22), it may be a risky investment, because debt in times of crises can make things worse. The good value, better than 90% 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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