December 28, 2023
Top 10 Stock NextEra Energy 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: NextEra Energy – Top 10 Stock in SDG 14: Life Below Water
NextEra Energy is listed as a top 10 stock on December 28, 2023 in the market index SDG 14 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 60 (high 60% performer), Obermatt assesses an overall buy recommendation for NextEra Energy on December 28, 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 NextEra Energy Buy
| 360 METRICS | December 28, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 7 |
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| GROWTH | ||||||||
| GROWTH | 45 |
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| SAFETY | ||||||||
| SAFETY | 72 |
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| SENTIMENT | ||||||||
| SENTIMENT | 79 |
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| 360° VIEW | ||||||||
| 360° VIEW | 60 |
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ANALYSIS: With an Obermatt 360° View of 60 (better than 60% compared with alternatives), overall professional sentiment and financial characteristics for the stock NextEra Energy are above average. The 360° View is based on consolidating four consolidated indicators, with half below and half above average for NextEra Energy. 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 72 or better than 72% 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 7, meaning that the share price of NextEra Energy 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 45. ...read more
RECOMMENDATION: With a consolidated 360° View of 60, NextEra Energy is better positioned than 60% 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 72), 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 NextEra Energỵ 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 NextEra Energy 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 NextEra Energy is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for NextEra Energy. Analyst Opinions are at a rank of 94 (better than 94% 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 NextEra Energy. Finally, the Professional Investors rank is 61, which means that currently, professional investors hold more stock in this company than in 61% of alternative investment opportunities. ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 79 (more positive than 79% compared with investment alternatives), NextEra Energy has a reputation among professional investors that is significantly higher than 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 46, which means that the current professional news and professional social networks tend to be negative when discussing this company (more negative news than for 54% of competitors). This could mean future risks and should make investors careful. Attention to negative news for NextEra Energy 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: NextEra Energy Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 7 (worse than 93% compared with alternatives), NextEra Energy shares are significantly more expensive than comparable stocks. The Value Rank is based on consolidating four value indicators, with all four indicators below average for NextEra Energy. Price-to-Sales is 2 which means that the stock price compared with what market professionals expect for future profits is higher than 98% of comparable companies, indicating a low value concerning NextEra Energy's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Price-to-Book Rank of 9, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of NextEra Energy. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 24 and Dividend Yield, which is lower than 77% of comparable companies, also make the stock more expensive compared with investment alternatives. ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 7, is a sell recommendation based on NextEra Energy's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for NextEra Energy? One reason may be that the company is simply too popular. If enough people want a particular stock, its price can exceed reasonable levels. This is often the case for companies offering new and exciting products and everybody wants a piece of the action. Should you pay a lot for a hot stock such as NextEra Energy? It's risky, and even if the stock price continues to grow because of popular demand, it may return to more typical lower levels later. And that return can be sudden and quick, making it impossible for retail investors to exit on time. Sometimes, high prices are deserved. This is the case when it is justified to believe that the company will dominate a market with high profit margins. It has happened in the past for many technology companies and indeed for commercially successful pharmaceutical discoveries. Sometimes they last, sometimes, they get eaten alive. NextEra Energy may be such a type of stock. That would mean, retail investors should be careful, only considering investing a small part of their wealth in this exciting category and always being ready to lose more than half, if not all of the investment. ...read more
Growth Strategy: NextEra Energy Growth Momentum low
ANALYSIS: With an Obermatt Growth Rank of 45 (better than 45% compared with alternatives), NextEra Energy 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 all but one indicator above average for NextEra Energy. Sales Growth has a value of 65 which means that currently professionals expect the company to grow more than 65% of its competitors. Profit Growth with a value of 73 and Capital Growth with a rank of 56 means that currently, professionals expect the company to grow both profits and invested capital more than of its competitors. But Stock Returns has only a rank of 7, which means that stock returns have recently been below 93% of alternative investments. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 45, is a hold recommendation for growth and momentum investors. NextEra Energy has only one below-average growth indicator, the stock returns. This is probably the least reliable growth indicator, because it measures company and investor expectations at the same time. The three other growth indicators, which are all positive for NextEra Energy, are more reliable measures of growth momentum. For this reason, the company seems to be on a good trajectory, unless you think the current period is not representative, because of unique events that will not be repeated in the future. ...read more
Safety Strategy: NextEra Energy Debt Financing Safety above-average
| SAFETY METRICS | December 28, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 66 |
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| REFINANCING | ||||||||
| REFINANCING | 16 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 95 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 72 |
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ANALYSIS: With an Obermatt Safety Rank of 72 (better than 72% compared with alternatives), the company NextEra Energy has financing practices on the safer side, which mean that their overall debt burden is lower than average. This doesn't mean that the business of NextEra Energy 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 NextEra Energy. Leverage is at a rank of 66, meaning the company has a below-average debt-to-equity ratio. It has less debt than 66% of its competitors. Liquidity is also good at a rank of 95, meaning the company generates more profit to service its debt than 95% 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 16, 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 84% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 72 (better than 72% compared with alternatives), NextEra Energy has a financing structure that is 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 NextEra Energy. 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: NextEra Energy Below-Average Financial Performance
| COMBINED PERFORMANCE | December 28, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 7 |
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| GROWTH | ||||||||
| GROWTH | 45 |
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| SAFETY | ||||||||
| SAFETY | 95 |
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| COMBINED | ||||||||
| COMBINED | 28 |
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ANALYSIS: With an Obermatt Combined Rank of 28 (worse than 72% compared with investment alternatives), NextEra Energy (Electric Utilities, USA) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of NextEra Energy are low in value (priced high) with a consolidated Value Rank of 7 (worse than 93% of alternatives) and show below-average growth (Growth Rank of 45) but are safely financed (Safety Rank of 72), which means low debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 28, is a hold recommendation based on NextEra Energy's financial characteristics. As the company NextEra Energy's critical financial metrics exhibit below-average performance, such as low value (Obermatt Value Rank of 7) and low growth (Obermatt Growth Rank of 45), 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 72) 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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