May 11, 2023
Top 10 Stock SGH Sell 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: SGH – Top 10 Stock in Wood & Timber Industry
SGH is listed as a top 10 stock on May 11, 2023 in the market index Timber Industry because of its high performance in at least one of the Obermatt investment strategies. Only one consolidated Obermatt Rank is above-average. The company is growing above average, but all other facts speak against a stock purchase, especially the low market sentiment by professional investors. Based on the Obermatt 360° Rank of 14 (14% performer), Obermatt issues an overall sell recommendation for SGH on May 11, 2023.
Snapshot: Obermatt Ranks
| Country | Australia |
| Industry | Trading & Distribution |
| Index | ASX 200, ASX 300, Recycling, Timber Industry |
| 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° Assessment SGH Sell
| 360 METRICS | May 11, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 9 |
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| GROWTH | ||||||||
| GROWTH | 81 |
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| SAFETY | ||||||||
| SAFETY | 12 |
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| SENTIMENT | ||||||||
| SENTIMENT | 43 |
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| 360° VIEW | ||||||||
| 360° VIEW | 14 |
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ANALYSIS: With an Obermatt 360° Rank of 14 (better than 14% compared with alternatives), overall professional sentiment and engagement for the stock SGH are critical, mostly below average. The 360° Rank is based on consolidating four consolidated indicators, with three out of four indicators below average for SGH. The consolidated Growth Rank has a good rank of 81, which means that the company experiences above-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth, as well as stock returns. It ranks higher than 81% of competitors in the same industry. The other indicators are below average, namely the Value, Safety, and Sentiment Ranks.The Value Rank at 9 means that the share price of SGH is on the high side compared with its peer regarding revenues, profits, and invested capital. The stock price is higher than 91% of alternative stocks in the same industry. The consolidated Safety Rank has a riskier rank of 12, which means that the company has a riskier financing structure than 88% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. The consolidated Sentiment Rank also has a low rank of 43, indicating professional investors are more pessimistic about the stock than for 57% of alternative investment opportunities. ...read more
RECOMMENDATION: With a 360° Rank of 14, SGH is worse than 86% of all alternative stock investment opportunities based on the Obermatt Method. This means that SGH shares are on the riskier side for investors. As only one of the consolidated Obermatt Ranks exhibits excellent performance, namely the above-average growth (Growth Rank of 81), it is a riskier stock investment proposition. Aside from the critical professional market sentiment (Sentiment Rank of 43), the company is rather risky when it comes to financing (Safety Rank of 12). The negative market view on SGH may be due to the high stock price (low value). A growth company like this may get too expensive at one point in time. If too many investors are desperate to join the party, they may drive stock prices above reasonable levels. While it is typical for growth companies to have low value, because investors are willing to pay more for companies that are expected to have high growth, the crucial question is: how much more do you pay for the stock of SGH compared with alternatives? You can use the following rule of thumb: The value rank shouldn’t be lower than one minus the growth rank. For example, if the growth rank is at 75, and the value rank is at 5, you should tread carefully. If the value rank is at 40, it still might be a good value (even though it is lower than 50). As market sentiment is critical, you should be careful with paying more than market-average for this stock and conduct further research into the company's future growth potential. ...read more
Sentiment Strategy: Professional Market Sentiment for SGH only reserved
ANALYSIS: With an Obermatt Sentiment Rank of 43 (better than 43% compared with alternatives), overall professional sentiment and engagement for the stock SGH is below industry average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the indicators below and above average for SGH. Analyst Opinions are at a rank of 34 (worse than 66% of alternative investments), which means that currently, stock research analysts tend to warn against investing in the stock of the company. But they are changing their opinions! Analyst Opinions Change has a rank of 60 which means that stock research experts are changing their opinions for the better. In other words, they are getting more optimistic of stock investments in SGH. Market Pulse is also positive with a rank of 56, which means that the current professional news and professional social networks are positive in their discussions about this company (more positive news than for 56% of competitors). Only professional investors tend to be absent with a Professional Investors rank of 48, which means that professional investors hold less stock in this company than in 52% of alternative investment opportunities. Pros tend to invest in other companies. But that could also be due to the size of the company. Professional investors tend to invest in XL and XXL companies. If the company is smaller than that, that fact alone may explain why there are fewer pros present. ...read more
RECOMMENDATION: With an Obermatt Sentiment Rank of 43 (less encouraging than 57% compared with investment alternatives), SGH has a reputation among professional investors that is below that of its competitors. Since analysts are getting more optimistic and the professional communication channels are positive, it may be an indication of a company that has the difficult times behind it or is getting less expensive for what they are. For medium to smaller companies, the positive sentiment indicators outshine the negative. ...read more
Value Strategy: SGH Stock Price Value low
ANALYSIS: With an Obermatt Value Rank of 9 (worse than 91% compared with alternatives), SGH 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 SGH. Price-to-Sales has a value of 21 which means that the stock price compared with what market professionals expect for future profits is higher than 79% of comparable companies, indicating a low value concerning SGH's sales levels. Price-to-Book Capital (also referred to as market-to-book ratio) also has a low Obermatt Price-to-Book Rank of 16, which means that both reliable company size indicators, sales, and invested capital cannot explain the high stock price of SGH. In addition, the two profit-related value indicators, Price-to-Profit (also referred to as price-earnings, P/E) with a low rank of 45 and Dividend Yield, which is lower than 73% 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 9, is a SELL recommendation based on SGH's stock price compared with the company's operational size and dividend yields. How can market participants pay such a high price for SGH? 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 new and exciting products where everybody wants a piece of the action. Should you pay a lot for a hot stock such as SGH? It's risky, and even if it continues to grow because of popular demand, it will most likely return to what it's worth. 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 reasonable for the company to dominate a market with high profit margins. It has happened in the past for many technology companies and indeed for successful pharmaceutical discoveries. Sometimes they last, sometimes, they get eaten alive. SGH 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: SGH Growth Momentum high
ANALYSIS: With an Obermatt Growth Rank of 81 (better than 81% compared with alternatives) for 2023, SGH shows one of the highest growth dynamics in its industry. Investors also speak of high momentum. The Growth Rank is based on consolidating four value indicators, with all but one indicator above average for SGH. Sales Growth has a rank of 67 which means that currently, professionals expect the company to grow more than 67% of its competitors. Both Profit Growth, with a rank of 72, and Stock Returns, with a rank of 87, are also above average. But Capital Growth only has a rank of 18, which means that, currently, professionals expect the company to grow its invested capital less than 28% of its competitors. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 81, is a BUY recommendation for growth and momentum investors. That may be a good sign if the company is already well positioned and doesn't require more investments at this time. They may focus on growing the top (revenues) and bottom (profits) lines, recently rewarded with above-average stock returns for shareholders. But it may also be a sign of danger as the company is falling back with capital investment activities concerning competition. This requires further analysis of corporate communications. ...read more
Safety Strategy: SGH Debt Financing Safety risky
| SAFETY METRICS | May 11, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 7 |
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| REFINANCING | ||||||||
| REFINANCING | 34 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 12 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 12 |
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ANALYSIS: With an Obermatt Safety Rank of 12 (better than 12% compared with alternatives), the company SGH 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 SGH 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 SGH. Liquidity is at 12, meaning that the company generates less profit to service its debt than 88% 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 7, meaning the company has an above-average debt-to-equity ratio. It has more debt than 93% of its competitors. Finally, Refinancing is at a rank of 34 which means that the portion of the debt about to be refinanced is above average. It has more debt in the refinancing stage than 66% of its competitors. ...read more
RECOMMENDATION: With an Obermatt Safety Rank of 12 (worse than 88% compared with alternatives), SGH 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. ...read more
Combined financial peformance: SGH Lowest Financial Performance
| COMBINED PERFORMANCE | May 11, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 9 |
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| GROWTH | ||||||||
| GROWTH | 81 |
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| SAFETY | ||||||||
| SAFETY | 12 |
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| COMBINED | ||||||||
| COMBINED | 12 |
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ANALYSIS: With an Obermatt Combined Rank of 12 (worse than 88% compared with investment alternatives), SGH (Trading & Distribution, Australia) shares have lower financial characteristics compared with similar stocks. Shares of SGH are low in value (priced high) with a consolidated Obermatt Value Rank of 9 (worse than 91% of alternatives), and are riskily financed (Safety Rank of 12, which means above-average debt burdens) but show above-average growth (Growth Rank of 81). ...read more
RECOMMENDATION: An Obermatt Combined Rank of 12, is a sell recommendation based on SGH's financial characteristics. As the company SGH shows low value with an Obermatt Value Rank of 9 (91% of comparable investments are less expensive), investors should look at the other ranks. In this case, growth is expected to be above-average, better than 81% of comparable companies (Obermatt Growth Rank is 81). This is a typical case. Companies with above average growth tend to cost more than the sluggish variety. If this is a high-growth company, the low Obermatt Safety Rank of 12 is a good sign. The more debt a well-performing company has, the higher the returns to shareholders. However, if growth turns negative or interest rates increase, high debt may become a burden. If you believe the future is bright for SGH, even a low-value company (in terms of its key financial indicators) can be a good investment. ...read more
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