September 21, 2023
Top 10 Stock Drax 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: Drax – Top 10 Stock in FTSE 250 Index
Drax 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. While only half of the consolidated Obermatt Ranks exhibit above-average performance, the professional market sentiment is positive and it may be a solid investment proposition, especially if a growth recovery is to be expected soon. Based on the Obermatt 360° View of 52 (high 52% performer), Obermatt assesses an overall buy recommendation for Drax on September 21, 2023.
Snapshot: Obermatt Ranks
| Country | United Kingdom |
| Industry | Power Producers & Traders |
| Index | FTSE All Shares, FTSE 250, FTSE 350, Low Emissions, Employee Focus EU |
| 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 Drax Buy
| 360 METRICS | September 21, 2023 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 92 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 15 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 43 |
|
||||||
| SENTIMENT | ||||||||
| SENTIMENT | 52 |
|
||||||
| 360° VIEW | ||||||||
| 360° VIEW | 52 |
|
||||||
ANALYSIS: With an Obermatt 360° View of 52 (better than 52% compared with alternatives), overall professional sentiment and financial characteristics for the stock Drax are above average. The 360° View is based on consolidating four consolidated indicators, with half the metrics below and half above average for Drax. The consolidated Value Rank has an attractive rank of 92, which means that the share price of Drax is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means that the stock price is lower than for 92% of alternative stocks in the same industry. The consolidated Sentiment Rank has a good rank of 52, which means that professional investors are more optimistic about the stock than for 52% of alternative investment opportunities. But the consolidated Growth Rank has a low rank of 15, which means that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, invested capital growth, and stock returns. The consolidated Safety Rank has a riskier rank of 43, meaning the company has a riskier financing structure than 57 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 52, Drax is better positioned than 52% of all alternative stock investment opportunities based on the Obermatt Method. Half of the consolidated Obermatt Ranks exhibit above-average performance, but the other half are below market levels. The company enjoys a good value (Value Rank of 92) and positive market sentiment in the professional investor community (Sentiment Rank of 52), but growth expectations are below-average (Growth Rank of 15) and the financing structure is on the risky side(Safety Rank of 43). This combination is rather dangerous, because high debt levels (low safety) require growth to finance the debt burden. The current low growth level may be temporary, because professionals are actually optimistic (positive sentiment). Good value is sometimes an indication that the company's future is challenging. The below-par growth performance may be the reason for this assessment. Companies with less growth typically have a lower price than fast-growing competitors. Even though professional investor sentiment is strong, we recommend further evaluating whether the future of Drax is as challenging as the stock's low price suggests. Since the professional community is optimistic, the stock might just be going through a more challenging phase now, indicating that timing might be good now. ...read more
Sentiment Strategy: Professional Market Sentiment for Drax positive
ANALYSIS: With an Obermatt Sentiment Rank of 52 (better than 52% compared with alternatives), overall professional sentiment and engagement for the stock Drax is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Drax. Analyst Opinions are at a rank of 75 (better than 75% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. In addition, Analyst Opinions Change has a rank of 50, which means that stock research experts are changing their opinions for the better in recommending investing in the company. In other words, they are getting even more optimistic about investments in Drax. Finally, the Professional Investors rank is 68, which means that currently, professional investors hold more stock in this company than in 68% of alternative investment opportunities. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 52 (more positive than 52% compared with investment alternatives), Drax has a reputation among professional investors that is above-average compared with that of its competitors. Pros tend to favor investing in this company. But there is also a signal for caution. Market Pulse has a rank of 9, which means that the current professional news and professional social networks tend to be negative when discussing this company (more negative news than for 91% of competitors). This could mean future risks and should make investors careful. Attention to negative news for Drax is worthwhile because they may be early warning signals. Without those, all other professional signals are encouraging, especially since analysts are getting more optimistic. ...read more
Value Strategy: Drax Stock Price Value at the top
ANALYSIS: With an Obermatt Value Rank of 92 (better than 92% compared with alternatives) for 2023, Drax shares are significantly less expensive than comparable stocks. The Value Rank is based on consolidating four value indicators that are all above average for Drax. Price-to-Sales is 89 which means that the stock price compared with what market professionals expect for future sales is lower than for 89% of comparable companies, indicating a good value for Drax's revenue size. The same is valid for expected Price-to-Profits, more favorable than for 95% of alternatives, and this is also true for the Price-to-Book capital ratio (also referred to as market-to-book ratio) with a Price-to-Capital Rank of 64. Compared with other companies in the same industry, dividend yields of Drax are expected to be higher than for 55% of all competitors (a Dividend Yield rank of 55). ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 92, is a buy recommendation based on Drax's stock price compared with the company's operational size and dividend yields. Since all value metrics are above the industry average, there is no objection to investing in Drax based on its detailed value metrics.
Growth Strategy: Drax Growth Momentum negative
| GROWTH METRICS | September 21, 2023 | |||||||
|---|---|---|---|---|---|---|---|---|
| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 44 |
|
||||||
| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 68 |
|
||||||
| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 8 |
|
||||||
| STOCK RETURNS | ||||||||
| STOCK RETURNS | 31 |
|
||||||
| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 15 |
|
||||||
ANALYSIS: With an Obermatt Growth Rank of 15 (better than 15% compared with alternatives), Drax 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 metrics below average for Drax. While Profit Growth has a good rank of 68, as professionals currently expect the company to grow its profits more than 68% of its competitors, all other growth indicators are below market averages. Sales Growth has a rank of 44, which means that currently professionals expect the company to grow less than 56% of its competitors, while Capital Growth has a rank of 8 and Stock Returns have been below market median, with a rank of 31 (69% of alternative investments were better). ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 15, is a sell recommendation for growth and momentum investors. While revenue growth and capital growth are good growth momentum indicators, profit is less reliable, because profits may increase due to cost-cutting measures which typically indicate negative growth momentum. "You can save a dollar only once" is the saying about such situations. Growth Investors should look at company priorities closely if they are interested in growth, because the increase in profits is not usually an indicator of growth, and stock prices have been below market, too. ...read more
Safety Strategy: Drax Debt Financing Safety below-average
| SAFETY METRICS | September 21, 2023 | |||||||
|---|---|---|---|---|---|---|---|---|
| LEVERAGE | ||||||||
| LEVERAGE | 54 |
|
||||||
| REFINANCING | ||||||||
| REFINANCING | 25 |
|
||||||
| LIQUIDITY | ||||||||
| LIQUIDITY | 60 |
|
||||||
| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 43 |
|
||||||
ANALYSIS: With an Obermatt Safety Rank of 43 (better than 43% compared with alternatives), the company Drax has financing practices on the riskier side, which means that their overall debt burden is above the industry average. This doesn't mean that the business of Drax 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 two out of three indicators above average for Drax. Leverage is at a rank of 54, meaning the company has a below-average debt-to-equity ratio. It has less debt than 54% of its competitors. Liquidity is also good at a rank of 60, meaning the company generates more profit to service its debt than 60% 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 25, 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 75% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 43 (worse than 57% compared with alternatives), Drax has a financing structure that is riskier 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 Drax. 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: Drax Below-Average Financial Performance
| COMBINED PERFORMANCE | September 21, 2023 | |||||||
|---|---|---|---|---|---|---|---|---|
| VALUE | ||||||||
| VALUE | 92 |
|
||||||
| GROWTH | ||||||||
| GROWTH | 15 |
|
||||||
| SAFETY | ||||||||
| SAFETY | 60 |
|
||||||
| COMBINED | ||||||||
| COMBINED | 48 |
|
||||||
ANALYSIS: With an Obermatt Combined Rank of 48 (worse than 52% compared with investment alternatives), Drax (Power Producers & Traders, United Kingdom) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Drax are a good value (attractively priced) with a consolidated Value Rank of 92 (better than 92% of alternatives) but show below-average growth (Growth Rank of 15), and are riskily financed (Safety Rank of 43), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 48, is a hold recommendation based on Drax's financial characteristics. As the company Drax's key financial metrics exhibit good value (Obermatt Value Rank of 92) but low growth (Obermatt Growth Rank of 15) and risky financing practices (Obermatt Safety Rank of 43), it may be a risky investment, because debt in times of crises can make things worse. The good value, better than 92% of comparable companies, may indicate 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. ...read more
Obermatt Portfolio Performance
We’re so convinced about our research, that we buy our stock tips.
See the performance of the Obermatt portfolio.