September 21, 2023
Top 10 Stock Chemring Strong 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: Chemring – Top 10 Stock in FTSE 250 Index
Chemring is listed as a top 10 stock on September 21, 2023 in the market index FTSE 250 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 90 (top 90% performer), Obermatt assesses an overall strong buy recommendation for Chemring on September 21, 2023.
Snapshot: Obermatt Ranks
| Country | United Kingdom |
| Industry | Aerospace & Defense |
| Index | FTSE All Shares, FTSE 250, FTSE 350 |
| Size class | Medium |
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 Chemring Strong Buy
| 360 METRICS | September 21, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 41 |
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| GROWTH | ||||||||
| GROWTH | 47 |
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| SAFETY | ||||||||
| SAFETY | 98 |
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| SENTIMENT | ||||||||
| SENTIMENT | 79 |
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| 360° VIEW | ||||||||
| 360° VIEW | 90 |
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ANALYSIS: With an Obermatt 360° View of 90 (better than 90% compared with alternatives) for 2023, overall professional sentiment and financial characteristics for the stock Chemring are very positive. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for Chemring. The consolidated Sentiment Rank has a good rank of 79, which means that professional investors are more optimistic about the stock than for 79% of alternative investment opportunities. It also rates well regarding its financing structure, with the consolidated Safety Rank at 98 or better than 98% 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 41, meaning that the share price of Chemring 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 47. ...read more
RECOMMENDATION: With a consolidated 360° View of 90, Chemring is better positioned than 90% 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 79) and safe financing practices (Safety Rank of 98), 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 Chemring̣ 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 Chemring very positive
ANALYSIS: With an Obermatt Sentiment Rank of 79 (better than 79% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock Chemring is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for Chemring. Analyst Opinions are at a rank of 76 (better than 76% 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 50, 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 Chemring. The Professional Investors rank is 90, which means that currently, professional investors hold more stock in this company than in 90% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 76 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 76% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 79 (more positive than 79% compared with investment alternatives), Chemring 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 Chemring 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: Chemring Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 41 (worse than 59% compared with alternatives), Chemring 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 Chemring. Expected dividend yields are higher than for 58% of comparable companies (a Dividend Yield rank of 58), making the stock attractive. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 56, which means that the stock price is lower compared with invested capital than for 56% of comparable investments. But in respect to sales and profits, the picture is reversed. Price-to-Sales is 25 which means that the stock price compared with what market professionals expect for future profits is higher than for 75% of comparable companies, indicating a low value concerning Chemring's sales levels. The Price-to-Profit ratio (also referred to as price-earnings (P/E) ratio) is also unfavorable for Chemring with a rank of 48. This means that the stock price, compared with what market professionals expect for future profits, is higher than for 52% of comparable companies, indicating a low value concerning Chemring's profit levels. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 41, is a hold recommendation based on Chemring's stock price compared with the company's operational size and dividend yields. The company seems confident that it can generate a reasonable return on invested capital, because it pays an above-average dividend while profits are below what you would expect for a company with this stock price. If you agree with this practice and believe that profits will return to higher levels, as the current dividend policy suggests, Chemring may be an attractive investment. If this is not the case, you may want to be careful with this stock as it is also expensive compared with its expected revenue levels. ...read more
Growth Strategy: Chemring Growth Momentum low
| GROWTH METRICS | September 21, 2023 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 65 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 27 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 91 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 27 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 47 |
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ANALYSIS: With an Obermatt Growth Rank of 47 (better than 47% compared with alternatives), Chemring 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 half of the indicators below and half above average for Chemring. Sales Growth has a rank of 65 which means that currently, professionals expect the company to grow more than 65% of its competitors. Capital Growth is also above 27% of competitors with a rank of 91. But Profit Growth only has a rank of 27, which means that currently professionals expect the company to grow its profits less than 73% of its competitors. And Stock Returns have also been below average with a rank of only 27. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 47, is a hold 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: Chemring Debt Financing Safety very solid
| SAFETY METRICS | September 21, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 90 |
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| REFINANCING | ||||||||
| REFINANCING | 38 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 90 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 98 |
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ANALYSIS: With an Obermatt Safety Rank of 98 (better than 98% compared with alternatives) for 2023, the company Chemring has safe financing practices, which means that their overall debt burden is low. This doesn't mean that the business of Chemring 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 Chemring. Leverage is at a rank of 90, meaning the company has a below-average debt-to-equity ratio. It has less debt than 90% of its competitors. Liquidity is also good at a rank of 90, meaning the company generates more profit to service its debt than 90% 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 38, 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 62% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 98 (better than 98% compared with alternatives), Chemring 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 Chemring. 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: Chemring Top Financial Performance
| COMBINED PERFORMANCE | September 21, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 41 |
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| GROWTH | ||||||||
| GROWTH | 47 |
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| SAFETY | ||||||||
| SAFETY | 90 |
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| COMBINED | ||||||||
| COMBINED | 82 |
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ANALYSIS: With an Obermatt Combined Rank of 82 (better than 82% compared with investment alternatives), Chemring (Aerospace & Defense, United Kingdom) shares have much better financial characteristics than comparable stocks. Shares of Chemring are low in value (priced high) with a consolidated Value Rank of 41 (worse than 59% of alternatives) and show below-average growth (Growth Rank of 47) but are safely financed (Safety Rank of 98), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 82, is a strong buy recommendation based on Chemring's financial characteristics. As the company Chemring's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 41) and low growth (Obermatt Growth Rank of 47), 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 98) 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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