January 25, 2024
Top 10 Stock EDP 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: EDP – Top 10 Stock in Nuclear Energy
EDP is listed as a top 10 stock on January 25, 2024 in the market index Nuclear 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 26 (26% performer), Obermatt assesses an overall hold recommendation for EDP on January 25, 2024.
Snapshot: Obermatt Ranks
| Country | Portugal |
| Industry | Electric Utilities |
| Index | Low Emissions, Employee Focus EU, Human Rights, Nuclear, PSI General, PSI 20 |
| 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 EDP Hold
| 360 METRICS | January 25, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 32 |
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| GROWTH | ||||||||
| GROWTH | 39 |
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| SAFETY | ||||||||
| SAFETY | 7 |
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| SENTIMENT | ||||||||
| SENTIMENT | 72 |
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| 360° VIEW | ||||||||
| 360° VIEW | 26 |
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ANALYSIS: With an Obermatt 360° View of 26 (better than 26% compared with alternatives), overall professional sentiment and financial characteristics for the stock EDP are below the industry average. The 360° View is based on consolidating four consolidated indicators, with three out of four indicators below average for EDP. The consolidated Sentiment Rank has a good rank of 72, which means that professional investors are more optimistic about the stock than for 72% of alternative investment opportunities. But all other ranks are below average. The consolidated Value Rank has a rank of 32, which means that the share price of EDP 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 39, 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 39% of competitors in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 7 which means that the company has a riskier financing structure than 93% 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 26, EDP is worse than 74% of all alternative stock investment opportunities based on the Obermatt Method. As only the professional market sentiment (Sentiment Rank of 72) 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 EDP̣ is bright. A small investment might be justified, but proceed with caution. ...read more
Sentiment Strategy: Professional Market Sentiment for EDP positive
ANALYSIS: With an Obermatt Sentiment Rank of 72 (better than 72% compared with alternatives), overall professional sentiment and engagement for the stock EDP is above average. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for EDP. Analyst Opinions are at a rank of 65 (better than 65% 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 56, which means that currently, stock research experts are getting even more optimistic. Obermatt Market Pulse further supports this with a rank of 63, which means that the current professional news and professional social networks are generally positive when discussing this company (more positive news than for 63% of competitors). But there are few stock holdings by institutional investors. The Professional Investors rank is low at 46, which means that currently, professional investors hold less stock in this company than in 54% of alternative investment opportunities. Pros tend to invest in other companies. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 72 (more positive than 72% compared with investment alternatives), EDP has a reputation among professional investors that is above-average compared with that of its competitors. Not having too many professionals invested in EDP may be less of an issue, especially if the stock is from a smaller company where professionals typically invest less. It is natural for professional investors to focus on large and extra-large companies, as they provide more safety. Smaller companies attract fewer professionals in the shareholder community. Overall, the signals from the professionals are still quite favorable for investments in EDP. ...read more
Value Strategy: EDP Stock Price Value below-average critical
ANALYSIS: With an Obermatt Value Rank of 32 (worse than 68% compared with alternatives), EDP shares are more expensive than the average comparable stock. The Value Rank is based on consolidating four value indicators, where half the indicators are below and half above average for EDP. Price-to-Sales (P/S) is 55, which means that the stock price compared with what market professionals expect for future sales is lower than for 55% of comparable companies, indicating a good value concerning EDP's revenue size. The same is valid for dividend yields with a Dividend Yield rank of 63, which means that dividends are expected to be higher than for 63% of comparable investments. On the other hand, the Price-to-Book Capital ratio (also referred to as market-to-book ratio) is less favorable than for 75% of alternatives (only 25% of peers have an even higher ratio). The same is valid for the Price-to-Profit (or Price / Earnings, P/E) ratio, which is higher than for 76% of comparable companies, making the stock more expensive compared with the company's expected profit levels. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 32, is a hold recommendation based on EDP's stock price compared with the company's operational size and dividend yields. This is a somewhat surprising picture, because it means that profits are low while dividends are high. One interpretation could be that profits are expected to increase, justifying the high dividend payments. But it could also mean that the company desperately keeps the high dividends to avoid a collapsing share price. This would be a rather dangerous constellation. ...read more
Growth Strategy: EDP Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 39 (better than 39% compared with alternatives), EDP 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, where half of the indicators are below and half above average for EDP. Profit Growth, with a rank of 81 (better than 81% of its competitors), and Capital Growth, with a rank of 51, are both positive, which is a healthy sign for positive development. But Sales Growth has only a rank of 27, which means that, currently, professionals expect the company to grow less than 73% of its competitors, and Stock Returns are at a rank of 39. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 39, is a hold recommendation for growth and momentum investors. Stock returns that are a thing of the past can be less of a problem. Below-average revenue growth may be caused by divestments of underperforming businesses. If that is the case, then the positive developments of profit and capital growth are signs of a company with growth potential. If these are the reasons, overall growth is well on track to making this stock attractive for growth investors. ...read more
Safety Strategy: EDP Debt Financing Safety risky
| SAFETY METRICS | January 25, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 42 |
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| REFINANCING | ||||||||
| REFINANCING | 9 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 27 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 7 |
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ANALYSIS: With an Obermatt Safety Rank of 7 (better than 7% compared with alternatives), the company EDP 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 EDP 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 all three metrics below average for EDP. Liquidity is at 27, meaning that the company generates less profit to service its debt than 73% of its competitors. This indicates that the company is on the riskier side when it comes to debt service. Even worse, Leverage is at a rank of 42, meaning the company has an above-average debt-to-equity ratio. It has more debt than 58% of its competitors. Finally, Refinancing is at a rank of 9 which means that the portion of the debt about to be refinanced is above average. It has more debt in the refinancing stage than 91% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 7 (worse than 93% compared with alternatives), EDP has a financing structure that is significantly riskier than that of its competitors. This combination is rather dangerous in most situations. Only very promising companies with bright future outlooks and stellar reputations can operate with such risky financing.
Combined financial peformance: EDP Lowest Financial Performance
| COMBINED PERFORMANCE | January 25, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 32 |
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| GROWTH | ||||||||
| GROWTH | 39 |
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| SAFETY | ||||||||
| SAFETY | 27 |
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| COMBINED | ||||||||
| COMBINED | 4 |
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ANALYSIS: With an Obermatt Combined Rank of 4 (worse than 96% compared with investment alternatives), EDP (Electric Utilities, Portugal) shares have lower financial characteristics compared with similar stocks. Shares of EDP are low in value (priced high) with a consolidated Value Rank of 32 (worse than 68% of alternatives), show below-average growth (Growth Rank of 39), and are riskily financed (Safety Rank of 7), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 4, is a sell recommendation based on EDP's financial characteristics. As the company EDP's key financial metrics all exhibit below-average performance, such as low value (Obermatt Value Rank of 32), low growth (Obermatt Growth Rank of 39), and risky financing practices (Obermatt Safety Rank of 7), 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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