The Safety Rank helps you understand how well-equipped a company is to weather financial stress. A Safety Rank of 75 means the company is more financially secure than 75% of comparable firms. A high Safety Rank suggests that the company manages its debt responsibly, maintains a strong equity base, and shows consistent financial discipline. These companies are often better equipped to handle market downturns or economic uncertainty. In contrast, a low Safety Rank indicates high leverage, weak capital structure, or inconsistent financial performance. That said, a low rank doesn’t always mean the company is in trouble, nor does a high rank guarantee long-term success. Use the Safety Rank as a signal to evaluate financial health quickly, but always pair it with other Obermatt metrics, such as Value, Growth, and Sentiment, for a more comprehensive picture.
"The Safety Rank is an important tool for evaluating a company’s financial strength, but like any metric, it should be used in context. A high Safety Rank signals that the company has low debt, healthy reserves, and the financial discipline to sustain itself through difficult periods. This is especially important for risk-averse investors, long-term holders, or those investing during uncertain times. However, a very high Safety Rank can also mean the company is being overly conservative, potentially missing out on growth opportunities by not taking on enough calculated risk.
Conversely, a company with a low Safety Rank could still be a worthwhile investment if it shows strong growth potential, innovative capabilities, or access to financing that justifies the risk. What matters is understanding why the rank is low. Is the company aggressively investing in future growth, or is it financially strained with no clear path forward?
Balance and consistency are key. A company with solid and consistent Safety, Growth, and Value Ranks over time is more likely to be financially sound and operationally efficient. Consistency across these metrics can indicate strong management and a well-executed strategy. On the other hand, big fluctuations in Safety Rank signal instability or poor financial planning.
In short, the Safety Rank is best used as a quick health check, a snapshot of how resilient a company is. But to make sound investment decisions, dig deeper. Look at trends over time, compare with other ranks, and always understand the story behind the numbers."
The Safety Rank you see is the result of combining several key financial health indicators into a single, easy-to-understand rank. Obermatt evaluates multiple dimensions of a company's financial stability, such as debt-to-equity ratios, interest coverage, liquidity measures, and equity buffers. Each of these individual ranks highlights a different way to measure whether a company is financially secure or not. Obermatt calculates the consolidated Safety Rank by averaging all three individual ranks. This averaging process smooths out distortions that may exist in any single metric, providing a more comprehensive and balanced view.
However, the process doesn't end there. To ensure the score is meaningful, this average is then compared against the averages of other companies in the same group or industry. The result is a relative rank between 1 and 100: the company with the best overall safety compared to its peers receives a Safety Rank of 100. In contrast, the one with the least attractive valuation gets a rank of 1. All others fall somewhere in between. This makes the Safety Rank not just a reflection of a company’s raw financial health, but a percentile-based comparison that shows how a stock stacks up in the broader market. In essence, it's a quick and powerful way to understand a company’s financial position across multiple dimensions, all at once.
We use net debt and equity at the end of the period.
Defined as:
Net Debt
Equity
We calculate net debt at the end of the period. The cash flow from operating activities is an average over a preceeding time period.
Defined as:
AC
Net Debt
We calculate net working capital (NWC) and equity at the end of the period.
Defined as:
NWC
Equity
NWC = Net working capital ; AC = Average cash flow from operating activities
Measures a company’s financial strength based on debt levels, liquidity, and capital structure. Higher ranks signal lower financial risk.
Tracks how fast a company is expanding across key metrics like revenue, profits, and assets compared to its peers.
Evaluates how attractively a company is priced using valuation metrics like earnings, sales, book value, and dividends relative to competitors.
Provides a balanced score that merges Value, Growth, and Safety Ranks for a well-rounded view of a company's financial performance.
Reflects market perception by analyzing investor behavior and recent stock performance relative to peers.
Offers a holistic rating that combines all key Obermatt Ranks: Value, Growth, Safety, and Sentiment for a comprehensive company assessment.
The higher, the better. For every stock, we judge its performance against its peers and rank it on a scale of 1 to 100. These ranks are percentiles: a rank of 75 means the company outperforms 75% of its peers in that specific area. The higher the rank, the better the stock stacks up against its peers.
