December 28, 2023
Top 10 Stock ARC Resource Hold 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: ARC Resource – Top 10 Stock in Oil & Gas Mining and Production
ARC Resource is listed as a top 10 stock on December 28, 2023 in the market index Oil & Gas because of its high performance in at least one of the Obermatt investment strategies. Two consolidated Obermatt Ranks are above-average. The company is safely financed and the professional investor sentiment is positive. Both are encouraging signals for a stock purchase decision, albeit at an above-average share price. Based on the Obermatt 360° View of 48 (48% performer), Obermatt assesses an overall hold recommendation for ARC Resource on December 28, 2023.
Snapshot: Obermatt Ranks
| Country | Canada |
| Industry | Oil & Gas Production |
| Index | Oil & Gas, TSX Composite |
| Size class | X-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 ARC Resource Hold
| 360 METRICS | December 28, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 35 |
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| GROWTH | ||||||||
| GROWTH | 17 |
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| SAFETY | ||||||||
| SAFETY | 70 |
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| SENTIMENT | ||||||||
| SENTIMENT | 86 |
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| 360° VIEW | ||||||||
| 360° VIEW | 48 |
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ANALYSIS: With an Obermatt 360° View of 48 (better than 48% compared with alternatives), overall professional sentiment and financial characteristics for the stock ARC Resource are below the industry average. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for ARC Resource. The consolidated Sentiment Rank has a good rank of 86, which means that professional investors are more optimistic about the stock than for 86% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 70 or better than 70% of its peers when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. But the stock is expensive and expects low growth. The consolidated Value Rank is only 35, meaning that the share price of ARC Resource is on the high side, compared with indicators such as revenues, profits, and invested capital. The company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth,and stock returns, with its Growth Rank at 17. ...read more
RECOMMENDATION: With a consolidated 360° View of 48, ARC Resource is worse than 52% of all alternative stock investment opportunities based on the Obermatt Method. As only half of the consolidated Obermatt Ranks exhibit excellent performance, namely the positive professional market sentiment (Sentiment Rank of 86) and safe financing practices (Safety Rank of 70), the case for investing in this stock needs further thought. The Value and the Safety Ranks are below average. The Safety Rank is the least critical of the four consolidated ranks, because it only reflects financing practices. So the question is: How to assess below-average value against above-average sentiment? This may be a case where growth is in the future, not yet reflected in current performance. Companies that might fall into this category are those with intellectual property, such as technology and pharmaceutical companies. In early phases, they are expensive relative to their size and have a lot of capital on their books, as is the case here. Investors expect a better future and are willing to pay a higher price than is warranted by the current company size. These higher prices drive stock price value down in the short term. In this case, future growth may be the strongest driver of the investment case, reflected by institutional investors' opinions. With a weak Value Rank, the question is how much to sacrifice value at the cost of positive sentiment. Sometimes market sentiment is just hype, but sometimes it is right. You pay more than market-average for this stock, but it may be worth it, if the future of ARC Resourcẹ is bright. Prudent investors may only want to invest a smaller portion of their wealth in such situations. Young investors can carry more risk but should still thrive for sufficient diversification. ...read more
Sentiment Strategy: Professional Market Sentiment for ARC Resource very positive
ANALYSIS: With an Obermatt Sentiment Rank of 86 (better than 86% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock ARC Resource is very positive. The Sentiment Rank is based on consolidating four sentiment indicators where all but one are above average for ARC Resource. Analyst Opinions are at a rank of 87 (better than 87% of alternative investments), which means that currently, stock research analysts tend to recommend a stock investment in the company. The Professional Investors rank is also good at 84, which means that currently, professional investors hold more stock in this company than in 84% of alternative investment opportunities. Pros tend to favor investing in this company. In addition, Market Pulse has a rank of 56 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 56% of competitors). But Analyst Opinions Change has a below-average rank of 29, which means that stock research experts are currently changing their opinions for the worse when it comes to recommending this stock. In other words, they are getting more critical of investments in ARC Resource. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 86 (more positive than 86% compared with investment alternatives), ARC Resource has a reputation among professional investors that is significantly higher than that of its competitors. This is an early sign of caution, even if the stock has significantly appreciated. If analysts change their opinions, the stock may become too expensive. If the price is on the way down, the trend may continue. This may be a stock with a good reputation and history, but it may have reached its breaking point by now. Investors should look at the Value Ranks as well. If they indicate trouble, it might just materialize in the future. ...read more
Value Strategy: ARC Resource Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 35 (worse than 65% compared with alternatives), ARC Resource shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with half of the indicators below and half above average for ARC Resource. Price-to-Profit (also referred to as price-earnings, P/E) is 56 which means that the stock price compared with what market professionals expect for future profits is lower than for 56% of comparable companies, indicating a good value concerning ARC Resource's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 32, which means that the stock price is lower as regards to invested capital than for 32% of comparable investments. On the other hand, Price-to-Sales is less favorable than 97% of alternatives (only 3% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than 27% of comparable companies, making the stock more expensive as regards to the company's expected dividend payouts. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 35, is a hold recommendation based on ARC Resource's stock price compared with the company's operational size and dividend yields. This is a puzzling picture, because it means that profits are high while dividends are low. Since the stock price is low compared with invested capital but high in respect to expected revenues, it means that the company has more invested capital than peers for generating the same amount of revenue. Since profits are higher, it could be a "cash cow" situation (using the classic Boston Consulting BCG matrix naming convention) where the company is on a downward trend, still living from the profits of past products. As the company pays low dividends, it may harbor the opinion that a turnaround is possible, and it rather invests the cash than pay it out to shareholders, thus sealing the company's fate early. Any investment optimism should only be a buy trigger once thorough research is completed. ...read more
Growth Strategy: ARC Resource Growth Momentum negative
ANALYSIS: With an Obermatt Growth Rank of 17 (better than 17% compared with alternatives), ARC Resource shows one of the most restricted growth dynamics in its industry. There is little momentum in this company. The Growth Rank is based on consolidating four value indicators, with three out of four indicators below average for ARC Resource. Sales Growth has a below market rank of 1, which means that, currently, professionals expect the company to grow less than 99% of its competitors. The same is valid for Capital Growth, with a rank of 36, and Profit Growth, with a rank of 27. Currently, professionals expect the company to grow its profits less than 73% of its competitors). Only shareholders are optimistic. Stock Returns are above average at a rank of 77, which means that the stock returns have recently been above 77% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 17, is a sell recommendation for growth and momentum investors. That picture may be the result for a company that has reached the bottom. All went south for ARC Resource, and it still looks bad, but some investors already see light at the end of the tunnel, rewarding the stock with recent above-market stock returns. It could also mean that investors are correcting an overreaction to negative news. If that were the case, the positive stock returns are not yet a sign of recovery. Investors should look closely at the Value and Sentiment indicators before they make a stock purchasing decision, because growth is unlikely to be the driving argument behind this investment. ...read more
Safety Strategy: ARC Resource Debt Financing Safety above-average
| SAFETY METRICS | December 28, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 72 |
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| REFINANCING | ||||||||
| REFINANCING | 40 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 83 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 70 |
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ANALYSIS: With an Obermatt Safety Rank of 70 (better than 70% compared with alternatives), the company ARC Resource 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 ARC Resource 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 ARC Resource. Leverage is at a rank of 72, meaning the company has a below-average debt-to-equity ratio. It has less debt than 72% of its competitors. Liquidity is also good at a rank of 83, meaning the company generates more profit to service its debt than 83% 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 40, 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 60% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 70 (better than 70% compared with alternatives), ARC Resource has a financing structure that is 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 ARC Resource. 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: ARC Resource Below-Average Financial Performance
| COMBINED PERFORMANCE | December 28, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 35 |
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| GROWTH | ||||||||
| GROWTH | 17 |
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| SAFETY | ||||||||
| SAFETY | 83 |
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| COMBINED | ||||||||
| COMBINED | 31 |
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ANALYSIS: With an Obermatt Combined Rank of 31 (worse than 69% compared with investment alternatives), ARC Resource (Oil & Gas Production, Canada) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of ARC Resource are low in value (priced high) with a consolidated Value Rank of 35 (worse than 65% of alternatives) and show below-average growth (Growth Rank of 17) but are safely financed (Safety Rank of 70), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 31, is a hold recommendation based on ARC Resource's financial characteristics. As the company ARC Resource's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 35) and low growth (Obermatt Growth Rank of 17), it is a somewhat questionable stock investment, where the risk of paying too much for the shares is significant, unless the company has an exceptionally bright future. In this case, good financing practices (Obermatt Safety Rank of 70) are a positive sign, because it may allow the company to weather challenging times until the hoped-for cash flows materialize. This may be true for high-tech or biotechnology companies with enough cash to sustain prolonged business development. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and unattractive today. In such cases, the Obermatt Method has limited value, as it is based on facts we can observe today. If the facts lie all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that account for a small fraction of a safe portfolio. ...read more
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