August 17, 2023
Top 10 Stock Rumo 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: Rumo – Top 10 Stock in Bolsa de Valores-Mercadorias | BOVESPA
Rumo is listed as a top 10 stock on August 17, 2023 in the market index BOVESPA because of its high performance in at least one of the Obermatt investment strategies. Three consolidated Obermatt Ranks are above-average. Only the Value Rank is below average. The investment rationale may be an investment in future growth, supported by professional market opinion. Based on the Obermatt 360° View of 68 (high 68% performer), Obermatt assesses an overall buy recommendation for Rumo on August 17, 2023.
Snapshot: Obermatt Ranks
| Country | Brazil |
| Industry | Railroads |
| Index | BOVESPA, Independent Boards Growth Markets |
| Size class | 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 Rumo Buy
| 360 METRICS | August 17, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 31 |
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| GROWTH | ||||||||
| GROWTH | 100 |
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| SAFETY | ||||||||
| SAFETY | 50 |
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| SENTIMENT | ||||||||
| SENTIMENT | 59 |
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| 360° VIEW | ||||||||
| 360° VIEW | 68 |
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ANALYSIS: With an Obermatt 360° View of 68 (better than 68% compared with alternatives), overall professional sentiment and financial characteristics for the stock Rumo are above average. The 360° View is based on consolidating four consolidated indicators, with all but one indicator above average for Rumo. The consolidated Growth Rank has a good rank of 100, 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 100% of competitors in the same industry. The consolidated Safety Rank at 50 means that the company has a financing structure that is safer than 50% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. Finally, the consolidated Sentiment Rank has a good rank of 59, which means that professional investors are more optimistic about the stock than for 59% of alternative investment opportunities. But the consolidated Value Rank is less desirable at 31, meaning that the share price of Rumo is on the higher side compared with indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 69% of alternative stocks in the same industry. ...read more
RECOMMENDATION: With a consolidated 360° View of 68, Rumo is better positioned than 68% of all alternative stock investment opportunities based on the Obermatt Method. As three out of four consolidated Obermatt Ranks exhibit excellent performance, such as above-average growth (Growth Rank of 100), a safe financing structure (Safety Rank of 50), and positive professional market sentiment (Sentiment Rank of 59), it is a solid stock investment where growth may be the strongest driver of the investment rationale, also reflected by institutional investors. It is typical for growth companies to have low value, as is the case here. 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 Rumo compared with alternatives? You can use the following rule of thumb: The growth rank measures the growth momentum of the company (100% better than peers). The value rank could be the reverse reflection of that (0%). A Value Rank below that level may be assessed as expensive, a rank above that is still good value. Sometimes market sentiment just reflects the past, sometimes the reality. You pay more than the market average for this stock, but it may be worth it. ...read more
Sentiment Strategy: Professional Market Sentiment for Rumo positive
ANALYSIS: With an Obermatt Sentiment Rank of 59 (better than 59% compared with alternatives), overall professional sentiment and engagement for the stock Rumo is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Rumo. Analyst Opinions are at a rank of 48 (worse than 52% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. Worse, Analyst Opinions Change has a rank of 47, which means that stock research experts are getting even more pessimistic. Other sentiment indicators are positive: The Professional Investors rank is 70, which means that professional investors hold more stock in this company than in 70% of alternative investment opportunities. So, pros tend to favor investing in this company. In addition, Market Pulse has a rank of 71, which means that the current professional news and professional social networks tend to be positive when discussing this company (more positive news than for 71% of competitors). While stock research analysts are getting ever more critical, many professional investors are committed to Rumo and the professional news channels are on the positive side. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 59 (more positive than 59% compared with investment alternatives), Rumo has a reputation among professional investors that is above-average compared with that of its competitors. This is an ambiguous picture: analysts are negative and getting even more critical, while the news in the market is positive. Who should investors believe? This is a difficult question in such a situation. Investors should proceed cautiously and verify not only the financial performance in the Obermatt Value, Growth and Safety Ranks but also independent news coverage of the company. ...read more
Value Strategy: Rumo Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 31 (worse than 69% compared with alternatives), Rumo shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with all four indicators below average for Rumo. Price-to-Sales is 29 which means that the stock price compared with what market professionals expect for future profits is higher than 71% of comparable companies, indicating a low value concerning Rumo's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Price-to-Book Rank of 38, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of Rumo. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 25 and Dividend Yield, which is lower than 78% 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 31, is a hold recommendation based on Rumo's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for Rumo? 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 Rumo? 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. Rumo 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: Rumo Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 100 (better than 100% compared with alternatives) for 2023, Rumo shows one of the highest growth dynamics in its industry. Investors also speak of high momentum. The Growth Rank is based on consolidating four value indicators, with all four indicators above average for Rumo. Sales Growth has a value of 88, which means that, currently, professionals expect the company to grow more than 88% of its competitors. The same is valid for Profit Growth with a value of 82 and for Capital Growth with 98. In addition, Stock Returns had an above-average rank value of 79, which means they have been higher than 79% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 100, is a buy recommendation for growth and momentum investors. Since all Growth Ranks are positive, Rumo exhibits above-average growth momentum. This could be due to a uniquely strong market position, proprietary technology, or an extensive corporate acquisition strategy. Growth investors will find this an attractive investment opportunity, unless they expect that the current phase is transitory and will deteriorate in the future. The current performance could also be a temporary recovery from a very low point, such as a turn-around situation. In the case of a turn-around, the current performance may or may not be followed by a continuing positive development. ...read more
Safety Strategy: Rumo Debt Financing Safety above-average
| SAFETY METRICS | August 17, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 46 |
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| REFINANCING | ||||||||
| REFINANCING | 74 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 30 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 50 |
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ANALYSIS: With an Obermatt Safety Rank of 50 (better than 50% compared with alternatives), the company Rumo has financing practices on the safer side, which mean that their overall debt burden is lower than average. This doesn't mean that the business of Rumo 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 just one indicator above average for Rumo and the other two below average. Refinancing is at 74, meaning the portion of the debt about to be refinanced is below average. It has less debt in the refinancing stage than 74% of its competitors. But Leverage is high with a rank of 46, meaning the company has an above-average debt-to-equity ratio. It has more debt than 54% of its competitors. Liquidity is also on the riskier side with a rank of 30, meaning the company generates less profit to service its debt than 70% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 50 (better than 50% compared with alternatives), Rumo has a financing structure that is safer than that of its competitors. A good Refinancing Rank means that the problems of the company may not be around the corner. But high Leverage is only good if things go well, and low Liquidity is a signal for caution. The financing signals for Rumo are on the riskier side, requiring the company's future to be on the safer side. Investors may want to look at Growth and Sentiment ranks before making an investment decision. ...read more
Combined financial peformance: Rumo Top Financial Performance
| COMBINED PERFORMANCE | August 17, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 31 |
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| GROWTH | ||||||||
| GROWTH | 100 |
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| SAFETY | ||||||||
| SAFETY | 30 |
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| COMBINED | ||||||||
| COMBINED | 80 |
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ANALYSIS: With an Obermatt Combined Rank of 80 (better than 80% compared with investment alternatives), Rumo (Railroads, Brazil) shares have much better financial characteristics than comparable stocks. Shares of Rumo are low in value (priced high) with a consolidated Value Rank of 31 (worse than 69% of alternatives). But they show above-average growth (Growth Rank of 100) and are safely financed (Safety Rank of 50, which means below-average debt burdens). ...read more
RECOMMENDATION: A Combined Rank of 80, is a strong buy recommendation based on Rumo's financial characteristics. Investors looking for growth and low financial risk may find this stock attractive. While the company Rumo exhibits low value (Obermatt Value Rank of 31), which means that the stock price is rather high, it also demonstrates above-average growth (Obermatt Growth Rank of 100). This is a typical case, as high-growth companies are often expensive. Good financing practices (Obermatt Safety Rank of 50) 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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