September 28, 2023
Top 10 Stock Smartgroup Buy Recommendation

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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 Smartgroup Buy

360 METRICS	September 28, 2023
VALUE
VALUE	39
GROWTH
GROWTH	95
SAFETY
SAFETY	18
SENTIMENT
SENTIMENT	81
360° VIEW
360° VIEW	68

ANALYSIS: With an Obermatt 360° View of 68 (better than 68% compared with alternatives), overall professional sentiment and financial characteristics for the stock Smartgroup are above average. The 360° View is based on consolidating four consolidated indicators, with half of the metrics below and half above average for Smartgroup. The consolidated Growth Rank has a good rank of 95, 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. This means that growth is higher than for 95% of competitors in the same industry. The consolidated Sentiment Rank also has a good rank of 81, which means that professional investors are more optimistic about the stock than for 81% of alternative investment opportunities. But the consolidated Value Rank has a less desirable rank of 39, which means that the share price of Smartgroup is on the higher side compared with typical size in indicators such as revenues, profits, and invested capital. This means the stock price is higher than for 61% of alternative stocks in the same industry. Finally, the consolidated Safety Rank has a riskier rank of 18, which means that the company has a financing structure that is riskier than those of 82% 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 68, Smartgroup is better positioned than 68% of all alternative stock investment opportunities based on the Obermatt Method. Only half of the consolidated Obermatt Ranks exhibit excellent performance, so one needs to take a close look. Growth is above-average (Growth Rank of 95), and professional market sentiment is positive (Sentiment Rank of 81), but value and safety are below average. The Safety Rank is the least significant of the four consolidated ranks, because it only reflects financing practices. In the case of high growth, aggressive financing is a good thing. So the question is: How to assess below-average value against above-average growth and sentiment? Growth may be the strongest driver of the investment rationale in this case, which is reflected in institutional investors' opinions. It is typical for growth companies to have low value, as is the case here. Investors are willing to pay more for companies that outperform their competitors. So the question is, how much do you sacrifice value for growth? You can use the following rule of thumb: If you take 100 minus the growth rank, you arrive at a possibly minimum level for the value 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 if the growth rank is above 60. Sometimes market sentiment just extrapolates the past, but sometimes it reflects reality. You pay more than the market average for this stock, but it may be worth it. ...read more

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Sentiment Strategy: Professional Market Sentiment for Smartgroup very positive

SENTIMENT METRICS	September 28, 2023
ANALYST OPINION
ANALYST OPINION	44
OPINIONS CHANGE
OPINIONS CHANGE	70
PRO HOLDINGS
PRO HOLDINGS	89
MARKET PULSE
MARKET PULSE	61
CONSOLIDATED RANK: SENTIMENT
CONSOLIDATED RANK: SENTIMENT	81

ANALYSIS: With an Obermatt Sentiment Rank of 81 (better than 81% compared with alternatives) for 2023, overall professional sentiment and engagement for the stock Smartgroup is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all but one indicator above average for Smartgroup. Analyst Opinions are at a rank of 44 (worse than 56% 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 70, which indicates a shift in stock research experts opinions for the better. In other words, they are getting more optimistic about stock investments in Smartgroup. Even better, the Professional Investors rank is 89, meaning that professional investors hold more stock in this company than in 89% of alternative investment opportunities. Pros tend to favor investing in this company. Furthermore, Market Pulse has a rank of 61, which means that the current professional news and professional social networks are upbeat when discussing this company (more positive news than for 61% of competitors). ...read more

RECOMMENDATION: With a consolidated Sentiment Rank of 81 (more positive than 81% compared with investment alternatives), Smartgroup has a reputation among professional investors that is significantly higher than that of its competitors. While analysts are still critical of the company, some are changing their minds. In addition, the professional news channels are optimistic, and many institutional investors have already bought stock in the company. These are encouraging signals, despite the still lower level of analyst recommendations. They may be due to a problematic past, and about to change. The positive sentiment signals are stronger than the negative. ...read more

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Value Strategy: Smartgroup Stock Price Value below-average critical

VALUE METRICS	September 28, 2023
PRICE VS. REVENUES (P/S)
PRICE VS. REVENUES (P/S)	13
PRICE VS. PROFITS (P/E)
PRICE VS. PROFITS (P/E)	59
PRICE VS. CAPITAL (Market-to-Book)
PRICE VS. CAPITAL (Market-to-Book)	19
DIVIDEND YIELD
DIVIDEND YIELD	90
CONSOLIDATED RANK: VALUE
CONSOLIDATED RANK: VALUE	39

ANALYSIS: With an Obermatt Value Rank of 39 (worse than 61% compared with alternatives), Smartgroup 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 Smartgroup. Price-to-Profit (also referred to as price-earnings, P/E) is 59 which means that the stock price compared with what market professionals expect for future profits is lower than for 59% of comparable companies, indicating a good value concerning Smartgroup's profit levels. The same is valid for Price-to-Book Capital (also referred to as market-to-book ratio) with a Price-to-Book Rank of 19, which means that the stock price is lower as regards to invested capital than for 19% of comparable investments. On the other hand, Price-to-Sales is less favorable than 87% of alternatives (only 13% of peers have an even less favorable ratio). The same is valid for dividend yield, which is lower than 10% of comparable companies, making the stock more expensive as regards to the company's expected dividend payouts. ...read more

RECOMMENDATION: The overall picture with a consolidated Value Rank of 39, is a hold recommendation based on Smartgroup's stock price compared with the company's operational size and dividend yields. This is a puzzling picture, because it means that profits are high while dividends are low. Since the stock price is low compared with invested capital but high in respect to expected revenues, it means that the company has more invested capital than peers for generating the same amount of revenue. Since profits are higher, it could be a "cash cow" situation (using the classic Boston Consulting BCG matrix naming convention) where the company is on a downward trend, still living from the profits of past products. As the company pays low dividends, it may harbor the opinion that a turnaround is possible, and it rather invests the cash than pay it out to shareholders, thus sealing the company's fate early. Any investment optimism should only be a buy trigger once thorough research is completed. ...read more

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Growth Strategy: Smartgroup Growth Momentum high

GROWTH METRICS	September 28, 2023
REVENUE GROWTH
REVENUE GROWTH	59
PROFIT GROWTH
PROFIT GROWTH	32
CAPITAL GROWTH
CAPITAL GROWTH	73
STOCK RETURNS
STOCK RETURNS	100
CONSOLIDATED RANK: GROWTH
CONSOLIDATED RANK: GROWTH	95

ANALYSIS: With an Obermatt Growth Rank of 95 (better than 95% compared with alternatives) for 2023, Smartgroup 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 Smartgroup. Sales Growth has a rank of 59 which means that currently, professionals expect the company to grow more than 59% of its competitors. Capital Growth is also above 32% of competitors with a rank of 73, and Stock Returns with the rank of 100 is also an outperformance. Only Profit Growth is low with a rank of 32 which means that currently, professionals expect the company to grow its profits less than 68% of its competitors. ...read more

RECOMMENDATION: The overall picture with a consolidated Growth Rank of 95, is a buy recommendation for growth and momentum investors. All three operating growth indicators, namely revenue, profit, and capital growth, are showing improvements. This is a good indication of a company with a positive future. That might, at the same time, be the simple reason why profit growth is low. A growing company needs money and thus can't yet show high profit growth. Look out for signs in corporate communication about extra growth efforts costing time and money. If that is the case, Smartgroup is a good growth stock. ...read more

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Safety Strategy: Smartgroup Debt Financing Safety risky

SAFETY METRICS	September 28, 2023
LEVERAGE
LEVERAGE	42
REFINANCING
REFINANCING	8
LIQUIDITY
LIQUIDITY	37
CONSOLIDATED RANK: SAFETY
CONSOLIDATED RANK: SAFETY	18

ANALYSIS: With an Obermatt Safety Rank of 18 (better than 18% compared with alternatives), the company Smartgroup 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 Smartgroup 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 Smartgroup. Liquidity is at 37, meaning that the company generates less profit to service its debt than 63% 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 8 which means that the portion of the debt about to be refinanced is above average. It has more debt in the refinancing stage than 92% of its competitors. ...read more

RECOMMENDATION: With a consolidated Safety Rank of 18 (worse than 82% compared with alternatives), Smartgroup 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.

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Combined financial peformance: Smartgroup Above-Average Financial Performance

COMBINED PERFORMANCE	September 28, 2023
VALUE
VALUE	39
GROWTH
GROWTH	95
SAFETY
SAFETY	37
COMBINED
COMBINED	50

ANALYSIS: With an Obermatt Combined Rank of 50 (better than 50% compared with investment alternatives), Smartgroup (HR- & Employment Services, Australia) shares have above-average financial characteristics compared with similar stocks. Shares of Smartgroup are low in value (priced high) with a consolidated Value Rank of 39 (worse than 61% of alternatives), and are riskily financed (Safety Rank of 18, which means above-average debt burdens) but show above-average growth (Growth Rank of 95). ...read more

RECOMMENDATION: A Combined Rank of 50, is a buy recommendation based on Smartgroup's financial characteristics. As the company Smartgroup shows low value with an Obermatt Value Rank of 39 (61% 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 95% of comparable companies (Obermatt Growth Rank is 95). This is a typical case. Companies with above average growth tend to cost more than stocks with slower growth expectations. If this is a high-growth company, the low Obermatt Safety Rank of 18 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 Smartgroup, even a low-value company (in terms of its key financial indicators) can be a good investment. ...read more

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