July 20, 2023
Top 10 Stock BAE Systems 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: BAE Systems – Top 10 Stock in Diversity Leaders in Europe
BAE Systems is listed as a top 10 stock on July 20, 2023 in the market index Diversity Europe because of its high performance in at least one of the Obermatt investment strategies. Only one consolidated Obermatt Rank is above-average. The company enjoys a positive professional investor sentiment, but all financial facts speak against a stock purchase. This is probably an investment into the future. Based on the Obermatt 360° View of 28 (28% performer), Obermatt assesses an overall hold recommendation for BAE Systems on July 20, 2023.
Snapshot: Obermatt Ranks
| Country | United Kingdom |
| Industry | Aerospace & Defense |
| Index | FTSE All Shares, FTSE 100, FTSE 350, Diversity Europe |
| Size class | XX-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 BAE Systems Hold
| 360 METRICS | July 20, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 35 |
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| GROWTH | ||||||||
| GROWTH | 27 |
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| SAFETY | ||||||||
| SAFETY | 16 |
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| SENTIMENT | ||||||||
| SENTIMENT | 97 |
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| 360° VIEW | ||||||||
| 360° VIEW | 28 |
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ANALYSIS: With an Obermatt 360° View of 28 (better than 28% compared with alternatives), overall professional sentiment and financial characteristics for the stock BAE Systems are below the industry average. The 360° View is based on consolidating four consolidated indicators, with three out of four indicators below average for BAE Systems. The consolidated Sentiment Rank has a good rank of 97, which means that professional investors are more optimistic about the stock than for 97% of alternative investment opportunities. But all other ranks are below average. The consolidated Value Rank has a rank of 35, which means that the share price of BAE Systems is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. The consolidated Growth Rank also has a low rank of 27, meaning that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth, and stock returns. This means that growth is lower than for 27% of competitors in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 16 which means that the company has a riskier financing structure than 84% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. ...read more
RECOMMENDATION: With a consolidated 360° View of 28, BAE Systems is worse than 72% of all alternative stock investment opportunities based on the Obermatt Method. As only the professional market sentiment (Sentiment Rank of 97) is above-average, and all other consolidated Obermatt Ranks are below peers, the stock investing proposition case is rather weak. The stock price is expensive for a company of this size in this industry, visible in the below-average Value Rank. Growth is below the competition based on the Growth Rank, and the company has more debt than other companies, according to the Safety Rank. So the question becomes: How important is the Sentiment Rank when all others are below average? When it comes to growth, the low rating might be justified if growth is expected in the future and not yet reflected in current performance. This is often the case for companies with intellectual property, such as technology and pharmaceutical companies. In the early phases, these companies are expensive compared with their size and may have a lot of debt on their books, as is the case here, as seen in the low Value and Safety Ranks. Future growth may be the strongest investment rationale in this case, which is only reflected by institutional investors' opinions. You pay more than the market average for this stock and invest in a rather debt-loaded enterprise, but it may be worth it if the future of BAE Systemṣ is bright. A small investment might be justified, but proceed with caution. ...read more
Sentiment Strategy: Professional Market Sentiment for BAE Systems very positive
ANALYSIS: With an Obermatt Sentiment Rank of 97 (better than 97% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock BAE Systems is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for BAE Systems. Analyst Opinions are at a rank of 57 (better than 57% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 86, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in BAE Systems. The Professional Investors rank is 85, which means that currently, professional investors hold more stock in this company than in 85% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 92 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 92% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 97 (more positive than 97% compared with investment alternatives), BAE Systems has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean BAE Systems stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: BAE Systems Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 35 (worse than 65% compared with alternatives), BAE Systems shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, with three out of four indicators below average for BAE Systems. Only the metric dividend yield has an above-average rank, reflecting that dividend practices are expected to be higher than 66% of comparable companies, making the stock an attractive buy for dividend investors. However, dividend investors may get disappointed because all other critical financial indicators are below the market median: Price-to-Sales is 30 which means that the stock price compared with what market professionals expect for future profits is higher than 70% of comparable companies, indicating a low value concerning BAE Systems's sales levels. The same is valid for Price-to-Profit (also referred to as price-earnings, P/E) with a rank of 41 which means that the stock price compared with what market professionals expect for future profit levels is higher than 59% of comparable companies. In addition, Price-to-Book (also referred to as market-to-book ratio) with a Price-to-Book Rank of 29 is also low. Compared with invested capital, the stock price is higher than for 71% of comparable investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 35, is a hold recommendation based on BAE Systems's stock price compared with the company's operational size and dividend yields. Should dividend investors pick BAE Systems? The company-reported financials speak against it. The company is expensive compared with revenue and invested capital levels, two reliable company size indicators. In addition, it currently has a low level of profits. How can future dividends be paid in the case that profits remain low? Dividend investors should choose BAE Systems only if they reasonably expect the low current profit levels to be transitory. ...read more
Growth Strategy: BAE Systems Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 27 (better than 27% compared with alternatives), BAE Systems shows a below-average growth dynamic in its industry. There is limited momentum in this company. The Growth Rank is based on consolidating four value indicators, with three out of four indicators below average for BAE Systems. Sales Growth has a below market rank of 38, which means that, currently, professionals expect the company to grow less than 62% of its competitors. The same is valid for Capital Growth, with a rank of 45, and Profit Growth, with a rank of 28. Currently, professionals expect the company to grow its profits less than 72% of its competitors). Only shareholders are optimistic. Stock Returns are above average at a rank of 51, which means that the stock returns have recently been above 51% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 27, is a hold recommendation for growth and momentum investors. That picture may be the result for a company that has reached the bottom. All went south for BAE Systems, 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: BAE Systems Debt Financing Safety risky
| SAFETY METRICS | July 20, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 52 |
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| REFINANCING | ||||||||
| REFINANCING | 20 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 34 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 16 |
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ANALYSIS: With an Obermatt Safety Rank of 16 (better than 16% compared with alternatives), the company BAE Systems has much riskier financing practices than comparable other companies, which means that their overall debt burden is significantly above the industry average. This doesn't mean that the business of BAE Systems is also risky, it only means that the company is on the riskier side in respect to bankruptcy in case things turn sour, assuming that public reporting is correct. The Safety Rank is based on consolidating three financing indicators, with just one indicator above average for BAE Systems and the other two below average. Leverage is at a rank of 52 meaning the company has a below-average debt-to-equity ratio. It has less debt than 52% of its competitors.Refinancing is at a rank of 20, which means that the portion of the debt about to be refinanced is above-average. It has more debt in the refinancing stage than 80% of its competitors. Liquidity is at a rank of 34, meaning that the company generates less profit to service its debt than 66% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 16 (worse than 84% compared with alternatives), BAE Systems has a financing structure that is significantly riskier than that of its competitors. This is an indication that the company is on the riskier side when it comes to debt service. There is only below-market average liquidity, and a short-term refinancing issue might be around the corner. But in the long-term, the debt levels of BAE Systems are on the safer side. ...read more
Combined financial peformance: BAE Systems Lowest Financial Performance
| COMBINED PERFORMANCE | July 20, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 35 |
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| GROWTH | ||||||||
| GROWTH | 27 |
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| SAFETY | ||||||||
| SAFETY | 34 |
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| COMBINED | ||||||||
| COMBINED | 1 |
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ANALYSIS: With an Obermatt Combined Rank of 1 (worse than 99% compared with investment alternatives), BAE Systems (Aerospace & Defense, United Kingdom) shares have lower financial characteristics compared with similar stocks. Shares of BAE Systems are low in value (priced high) with a consolidated Value Rank of 35 (worse than 65% of alternatives), show below-average growth (Growth Rank of 27), and are riskily financed (Safety Rank of 16), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 1, is a sell recommendation based on BAE Systems's financial characteristics. As the company BAE Systems's key financial metrics all exhibit below-average performance, such as low value (Obermatt Value Rank of 35), low growth (Obermatt Growth Rank of 27), and risky financing practices (Obermatt Safety Rank of 16), 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. Such poor financial performance sometimes indicates that the company's business is all concentrated in some distant future. This is sometimes the case for high-tech or biotechnology companies. If they own properties that only provide cash flows in the future, the stock may look excessively expensive and risky today. In such cases, the Obermatt Method has limited value as it is based on facts we can observe today. If the facts are all in the future, stock investing becomes guesswork, and this should only be a driver in a limited number of investments that should only amount to a small fraction of a safe portfolio. ...read more
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