December 21, 2023
Top 10 Stock The a2 Milk Company 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: The a2 Milk Company – Top 10 Stock in Australian Securities Exchange Index ASX 100
The a2 Milk Company is listed as a top 10 stock on December 21, 2023 in the market index ASX 100 because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. While the company shows high growth, the stock price is high yet professional investor sentiment is low, which may be due to overly optimistic investor behavior, reflected in a low stock price value. Based on the Obermatt 360° View of 51 (high 51% performer), Obermatt assesses an overall buy recommendation for The a2 Milk Company on December 21, 2023.
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 The a2 Milk Company Buy
| 360 METRICS | December 21, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 8 |
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| GROWTH | ||||||||
| GROWTH | 71 |
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| SAFETY | ||||||||
| SAFETY | 81 |
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| SENTIMENT | ||||||||
| SENTIMENT | 44 |
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| 360° VIEW | ||||||||
| 360° VIEW | 51 |
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ANALYSIS: With an Obermatt 360° View of 51 (better than 51% compared with alternatives), overall professional sentiment and financial characteristics for the stock The a2 Milk Company are above average. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for The a2 Milk Company. The consolidated Growth Rank has a good rank of 71, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. This means that growth is higher than for 71% of competitors in the same industry. In addition, the consolidated Safety Rank has a safer rank of 81 which means that the company has a financing structure that is safer than 81% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the consolidated Value Rank has a less desirable rank of 8 which means that the share price of The a2 Milk Company is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is higher than for 92% of alternative stocks in the same industry. The consolidated Sentiment Rank also has a low rank of 44, which means that professional investors are more pessimistic about the stock than for 56% of alternative investment opportunities. ...read more
RECOMMENDATION: With a consolidated 360° View of 51, The a2 Milk Company is better positioned than 51% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, the picture is ambiguous. Growth is above-average (Growth Rank of 71), and the company is safely financed (Safety Rank of 81). However, professional market sentiment is low(Sentiment Rank of 44). The negative market view on The a2 Milk Company may be due to the high stock price (low value). A growth company like this may get too expensive at one point in time. If too many investors are desperate to board the train, they may drive stock prices above reasonable levels. It is typical for growth companies to have low value ratings, because investors are willing to pay more for companies that outperform their competitors. So the question is, how much more do you pay for the stock of The a2 Milk Company compared with alternatives? You can use the following rule of thumb: The value rank shouldn’t be lower than one hundred minus the growth rank. For example, if the growth rank is at 75, and the value rank is at 5, you should tread carefully. If the value rank is at 40, it still might be a good value if the value rank is above 60. As market sentiment is low, you should be careful with paying more than market-average for this stock and conduct further research into the company’s future growth potential. ...read more
Sentiment Strategy: Professional Market Sentiment for The a2 Milk Company only reserved
ANALYSIS: With an Obermatt Sentiment Rank of 44 (better than 44% compared with alternatives), overall professional sentiment and engagement for the stock The a2 Milk Company is below industry average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for The a2 Milk Company. Analyst Opinions are at a rank of 54 (better than 54% 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 50, which means that currently, stock research experts are getting even more optimistic. Obermatt Market Pulse further supports this with a rank of 76, which means that the current professional news and professional social networks are generally positive when discussing this company (more positive news than for 76% of competitors). But there are few stock holdings by institutional investors. The Professional Investors rank is low at 30, which means that currently, professional investors hold less stock in this company than in 70% of alternative investment opportunities. Pros tend to invest in other companies. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 44 (less encouraging than 56% compared with investment alternatives), The a2 Milk Company has a reputation among professional investors that is below that of its competitors. Not having too many professionals invested in The a2 Milk Company 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 The a2 Milk Company. ...read more
Value Strategy: The a2 Milk Company Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 8 (worse than 92% compared with alternatives), The a2 Milk Company shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with all four indicators below average for The a2 Milk Company. Price-to-Sales is 15 which means that the stock price compared with what market professionals expect for future profits is higher than 85% of comparable companies, indicating a low value concerning The a2 Milk Company's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Price-to-Book Rank of 13, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of The a2 Milk Company. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 28 and Dividend Yield, which is lower than 92% of comparable companies, also make the stock more expensive compared with investment alternatives. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 8, is a sell recommendation based on The a2 Milk Company's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for The a2 Milk Company? One reason may be that the company is simply too popular. If enough people want a particular stock, its price can exceed reasonable levels. This is often the case for companies offering new and exciting products and everybody wants a piece of the action. Should you pay a lot for a hot stock such as The a2 Milk Company? It's risky, and even if the stock price continues to grow because of popular demand, it may return to more typical lower levels later. And that return can be sudden and quick, making it impossible for retail investors to exit on time. Sometimes, high prices are deserved. This is the case when it is justified to believe that the company will dominate a market with high profit margins. It has happened in the past for many technology companies and indeed for commercially successful pharmaceutical discoveries. Sometimes they last, sometimes, they get eaten alive. The a2 Milk Company may be such a type of stock. That would mean, retail investors should be careful, only considering investing a small part of their wealth in this exciting category and always being ready to lose more than half, if not all of the investment. ...read more
Growth Strategy: The a2 Milk Company Growth Momentum good
| GROWTH METRICS | December 21, 2023 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 92 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 37 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 100 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 5 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 71 |
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ANALYSIS: With an Obermatt Growth Rank of 71 (better than 71% compared with alternatives), The a2 Milk Company shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for The a2 Milk Company. Sales Growth has a rank of 92 which means that currently, professionals expect the company to grow more than 92% of its competitors. Capital Growth is also above 37% of competitors with a rank of 100. But Profit Growth only has a rank of 37, which means that currently professionals expect the company to grow its profits less than 63% of its competitors. And Stock Returns have also been below average with a rank of only 5. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 71, is a buy 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: The a2 Milk Company Debt Financing Safety very solid
| SAFETY METRICS | December 21, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 82 |
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| REFINANCING | ||||||||
| REFINANCING | 33 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 82 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 81 |
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ANALYSIS: With an Obermatt Safety Rank of 81 (better than 81% compared with alternatives) for 2023, the company The a2 Milk Company has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of The a2 Milk Company is safe, it only means that the company is on the safer side regarding possible bankruptcy, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with two out of three indicators above average for The a2 Milk Company. Leverage is at a rank of 82, meaning the company has a below-average debt-to-equity ratio. It has less debt than 82% of its competitors. Liquidity is also good at a rank of 82, meaning the company generates more profit to service its debt than 82% of its competitors. This indicates that the company is on the safer side when it comes to debt service. But Refinancing is lower at a rank of 33, 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 67% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 81 (better than 81% compared with alternatives), The a2 Milk Company has a financing structure that is significantly safer than that of its competitors. The refinancing issues could be a short-term problem, especially if the company has reputation issues. Banks and investors don't like to refinance debt if there are clouds on the horizon. For this reason, investors should look at the refinancing environment for The a2 Milk Company. Does it look safe that debt that is coming due can be covered with new debt? If that is the case, then the financing situation of the company is on the safer side. If not, it may be better to wait until refinancing has been completed and the Refinancing rank is good again. ...read more
Combined financial peformance: The a2 Milk Company Above-Average Financial Performance
| COMBINED PERFORMANCE | December 21, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 8 |
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| GROWTH | ||||||||
| GROWTH | 71 |
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| SAFETY | ||||||||
| SAFETY | 82 |
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| COMBINED | ||||||||
| COMBINED | 58 |
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ANALYSIS: With an Obermatt Combined Rank of 58 (better than 58% compared with investment alternatives), The a2 Milk Company (Packaged Foods & Meats, New Zealand) shares have above-average financial characteristics compared with similar stocks. Shares of The a2 Milk Company are low in value (priced high) with a consolidated Value Rank of 8 (worse than 92% of alternatives). But they show above-average growth (Growth Rank of 71) and are safely financed (Safety Rank of 81, which means below-average debt burdens). ...read more
RECOMMENDATION: A Combined Rank of 58, is a buy recommendation based on The a2 Milk Company's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company The a2 Milk Company exhibits low value (Obermatt Value Rank of 8), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 71). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 81) are a double-edged sword: if the company continues growing, low debt limits shareholder returns. But if the company increases its debt, it will also increase risk. In other words, this is an investment on the safer side, despite the above-average price (low value). ...read more
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