February 17, 2022

Why do some companies have low Obermatt Safety ranks?

This video is in German only as it was recorded in an online discussion. Obermatt now has English coffee chat Zoom discussions every second Friday of the month. Sign up here.

One of the guests of our weekly Zoom coffee chat stock chats wanted to know why exactly some of the companies have low Safety ranks - is it the company or the Obermatt Method?

Obermttt consolidated ranks such as the Safety Rank are percentile ranks which means that 10% of all companies have ranks lower than 10 and 20% have ranks higher than 80. So the Safety Rank reflects the risk that the company is willing to take with their financing strategy.

There are some exceptions where Safety Ranks may offer a picture that is too dark. For example, in the automotive industry, many car manufacturers lease many of their vehicles to their customers. This way they have debt levels like banks and yet still are not riskily financed because they have claims on assets that are not on their balance sheets. Some other companies have obligations towards other companies that own their infrastructure.

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