Obermatt rank method
The rank method for an objective and independent stock analysis.
Obermatt analyzes stocks exclusively on financial facts and fundamentals analysis. This is different from stock analyst ratings that use all sorts of personal judgements to come up with their stock valuations. This means that with Obermatt, there are no personal feelings or opinions involved, only the hard facts of fundamentals analysis and quantitative investment metrics.
Financial ratios become Obermatt Ranks
The process works as follows: Obermatt first converts the key financial metrics to Obermatt ranks (zero to 100). The higher the rank, the better the financial metrics from the perspective of an investor. Related financial ratios are then combined into stock investment strategies. These strategy ranks are the result of the Obermatt stock recommendation for the Top 10 Stocks.
A company that performs better against comparable companies is found at the top of the list. Comparable companies make up the peer universe. Each peer universe consists of dozens of other companies that follow similar market cycles, produce similar products, or have similar distribution markets.
Every financial metric is converted to a rank. These ranks are to be understood as percentile ranks, where the 0th (zero) percentile is the lowest and the 100th percentile is the highest rank. The percentile rank quantifies the percentage of competitors in the peer universe, which were outperformed by the company. A rank of 75 means that the company is better than 75% of the peer companies in the peer universe.
Indexing company performance is an intensive computation process, but also brings many benefits. An important advantage is the ability to easily identify the winners, regardless of whether the markets are rising or falling.
Company A recorded the following financial performance on the metrics used for the Growth strategy. It received an Obermatt Percentile Rank of 84 (better than 84% of its peers):
|Profit Growth: 2%|
|Shareholder Return: 5%|
|Revenue Growth: 10%|
Company A’s performance is compared with the performance of each of the companies in its peer universe on each of the three metrics profit growth, shareholder return and revenue growth. Obermatt then calculates the average percentile rank for all three metrics which happens to be 71 (not shown in the table above). The calculation is not done yet. Obermatt then takes this average rank and compares it to the average rank of all the peers in the peer universe, in which case the overall rank is 84%. Obermatt shows this rank as the overall rank for the Growth investment strategy.
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