December 21, 2023
Top 10 Stock Challenger 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: Challenger – Top 10 Stock in Australian Securities Exchange Index ASX 100
Challenger 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. As three out of four consolidated Obermatt Ranks exhibit excellent performance, it is a solid investment where the risk of paying too much for the shares is low, despite a currently slow growth momentum. Based on the Obermatt 360° View of 40 (40% performer), Obermatt assesses an overall hold recommendation for Challenger 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 Challenger Hold
| 360 METRICS | December 21, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 55 |
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| GROWTH | ||||||||
| GROWTH | 19 |
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| SAFETY | ||||||||
| SAFETY | 91 |
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| SENTIMENT | ||||||||
| SENTIMENT | 55 |
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| 360° VIEW | ||||||||
| 360° VIEW | 40 |
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ANALYSIS: With an Obermatt 360° View of 40 (better than 40% compared with alternatives), overall professional sentiment and financial characteristics for the stock Challenger are below the industry average. The 360° View is based on consolidating four consolidated indicators, with half of the indicators below and half above average for Challenger. The consolidated Value Rank has an attractive rank of 55, which means that the share price of Challenger is on the lower side compared with typical size in indicators such as revenues, profits, and invested capital. This means the stock price is lower than for 55% of alternative stocks in the same industry. The company is also safely financed with a Safety rank of 91. In addition, professional market sentiment is above average compared with other stock investment alternatives with a Sentiment Rank of 55. But the consolidated Growth Rank has a low rank of 19, which means that the company is below average in terms of growth and momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. 81 of its competitors have better growth. ...read more
RECOMMENDATION: With a consolidated 360° View of 40, Challenger is worse than 60% of all alternative stock investment opportunities based on the Obermatt Method. Three out of four consolidated Obermatt Ranks show above-average performance. The stock has as good value (Value Rank of 55), secure financing practices (Safety Rank of 91), and positive market sentiment in the professional investor community (Sentiment Rank of 55). It is a solid stock investment where the risk of paying too much for the shares is limited, and disappointments are less likely to occur. The company’s growth expectations are below the industry average (Growth Rank of 19), but that could also be temporary since professional investors remain optimistic despite the low growth numbers. The low price as reflected in the good Value Rank could indicate that the company's future is challenging. The below-par growth performance may be the reason for this. Companies that grow less are typically cheaper than fast-growing competitors. We recommend evaluating whether the future of Challenger is as difficult as the stock’s low price suggests, despite the positive professional investor sentiment. Since the professional community is optimistic, you might have less to worry about, and the stock may just go through a more challenging phase now, indicating good timing. ...read more
Sentiment Strategy: Professional Market Sentiment for Challenger positive
ANALYSIS: With an Obermatt Sentiment Rank of 55 (better than 55% compared with alternatives), overall professional sentiment and engagement for the stock Challenger is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Challenger. Analyst Opinions are at a rank of 35 (worse than 65% 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 41, which means that stock research experts are getting even more pessimistic. Other sentiment indicators are positive: The Professional Investors rank is 72, which means that professional investors hold more stock in this company than in 72% of alternative investment opportunities. So, pros tend to favor investing in this company. In addition, Market Pulse has a rank of 67, which means that the current professional news and professional social networks tend to be positive when discussing this company (more positive news than for 67% of competitors). While stock research analysts are getting ever more critical, many professional investors are committed to Challenger and the professional news channels are on the positive side. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 55 (more positive than 55% compared with investment alternatives), Challenger 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: Challenger Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 55 (better than 55% compared with alternatives), Challenger shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, with three out of four indicators above average for Challenger. Price-to-Profit (also referred to as price to earnings, P/E ratio) is 50 which means that the stock price compared with what market professionals expect for future profits is lower than for 50% of comparable companies, indicating a good value concerning Challenger's profit levels. The same is valid for the expected Price-to-Book Capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 52, and for Dividend Yield with a Dividend Yield Rank of 63. But, compared with other companies in the same industry, the stock price is higher than average as regards expected revenues; only 62% of all competitors have an even higher stock price as regards to sales revenues (a Price-to-Sales Rank of 38). Profits, the level of invested capital, and dividend policy suggest that this stock is attractively priced. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 55, is a buy recommendation based on Challenger's stock price compared with the company's operational size and dividend yields. Since it is on the expensive side for Price-to-Sales, it may mean that Challenger has pricing power in its distribution market because it can charge higher prices than its competitors. If this is the case, all four value indicators are positive signals for purchasing Challenger shares. ...read more
Growth Strategy: Challenger Growth Momentum negative
ANALYSIS: With an Obermatt Growth Rank of 19 (better than 19% compared with alternatives), Challenger 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 Challenger. While Sales Growth ranks at 69, professionals currently expect the company to grow more than 69% of its competitors, while all other growth ranks are below the market median. Profit Growth has a rank of 48, which means that, currently, professionals expect the company to grow its profits less than 52% of its competitors, and Capital Growth has a low rank of 8. Historic stock returns were also below average with a current Stock Returns rank of 13 which means that the stock returns have recently been below 87% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 19, is a sell recommendation for growth and momentum investors. If revenues are expected to increase, but all other growth indicators are negative, the company may be investing in future growth through means not visible in the balance sheet and thus not reflected in capital growth. The fact that Stock Returns have been below market doesn't mean that much, as it may be due to overly optimistic investor behavior in the past, which has been corrected to a more reasonable level recently. If that were the case, a positive Value Rank would be a reason to invest because the company is still expected to grow, while stock prices are now at a more reasonable level. ...read more
Safety Strategy: Challenger Debt Financing Safety very solid
| SAFETY METRICS | December 21, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 40 |
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| REFINANCING | ||||||||
| REFINANCING | 47 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 84 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 91 |
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ANALYSIS: With an Obermatt Safety Rank of 91 (better than 91% compared with alternatives) for 2023, the company Challenger has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Challenger 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 Challenger. Liquidity is at 84, meaning the company generates more profit to service its debt than 84% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier at a rank of 47, 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 53% of its competitors. Leverage is also high at a rank of 40, which means that the company has an above-average debt-to-equity ratio. It has more debt than 60% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 91 (better than 91% compared with alternatives), Challenger has a financing structure that is significantly safer than that of its competitors. High Leverage (a low Obermatt Leverage Rank) is good in good times, because it usually indicates that shareholders get higher returns. The good Liquidity performance of the company is an indicator that this is the case. However, if you expect an economic downturn, you may stay clear of this stock because they have an above-average debt level that needs refinancing soon. ...read more
Combined financial peformance: Challenger Below-Average Financial Performance
| COMBINED PERFORMANCE | December 21, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 55 |
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| GROWTH | ||||||||
| GROWTH | 19 |
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| SAFETY | ||||||||
| SAFETY | 84 |
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| COMBINED | ||||||||
| COMBINED | 37 |
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ANALYSIS: With an Obermatt Combined Rank of 37 (worse than 63% compared with investment alternatives), Challenger (Other Financial Services, Australia) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Challenger are a good value (attractively priced) with a consolidated Value Rank of 55 (better than 55% of alternatives), are safely financed (Safety Rank of 91, which means low debt burdens), but show below-average growth (Growth Rank of 19). ...read more
RECOMMENDATION: A Combined Rank of 37, is a hold recommendation based on Challenger's financial characteristics. As the company Challenger's key financial metrics exhibit good value (Obermatt Value Rank of 55) but low growth (Obermatt Growth Rank of 19) while being safely financed (Obermatt Safety Rank of 91), it may be a safer investment because companies with low debt can better withstand times of crises. Yet the good value, better than 55% of comparable companies, may also indicate that the company's future is challenging. If you believe that low growth is temporary or just due to a specific current event, you may conclude that the good value of the stock provides an attractive investment opportunity and the downside is limited due to below-average financing risks. ...read more
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