September 14, 2023
Top 10 Stock Telefonica 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: Telefonica – Top 10 Stock in Iberia Index IBEX 35
Telefonica is listed as a top 10 stock on September 14, 2023 in the market index IBEX 35 because of its high performance in at least one of the Obermatt investment strategies. Only the Obermatt Value Rank exhibits above-average performance, which means that the stock is seen as critical by the professional community and other financial facts are below average, conveying mixed investment signals. Based on the Obermatt 360° View of 39 (39% performer), Obermatt assesses an overall hold recommendation for Telefonica on September 14, 2023.
Snapshot: Obermatt Ranks
| Country | Spain |
| Industry | Integrated Telecommunication |
| Index | IBEX 35, Artificial Intelligence, Dividends Europe, Diversity Europe, Recycling, Telecommunications |
| 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 Telefonica Hold
| 360 METRICS | September 14, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 81 |
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| GROWTH | ||||||||
| GROWTH | 37 |
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| SAFETY | ||||||||
| SAFETY | 18 |
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| SENTIMENT | ||||||||
| SENTIMENT | 49 |
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| 360° VIEW | ||||||||
| 360° VIEW | 39 |
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ANALYSIS: With an Obermatt 360° View of 39 (better than 39% compared with alternatives), overall professional sentiment and financial characteristics for the stock Telefonica are below the industry average. The 360° View is based on consolidating four consolidated indicators, with three out of four indicators below average for Telefonica. Only the consolidated Value Rank has an attractive rank of 81, which means that the share price of Telefonica 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 81% of alternative stocks in the same industry. All other consolidated ranks are below average. The consolidated Growth Rank has a low rank of 37, which means that the company exhibits below-average growth momentum when looking at financial metrics such as revenue, profit, and invested capital growth as well as stock returns. The consolidated Safety Rank has a riskier rank of 18, meaning the company has a riskier financing structure than 82% comparable companies when looking at the amount of its debt, its refinancing requirements, and its ability to service debt. Finally, professionals are more pessimistic about the stock than for 51% of alternative investment opportunities, reflected in the consolidated Sentiment Rank of 49. ...read more
RECOMMENDATION: With a consolidated 360° View of 39, Telefonica is worse than 61% of all alternative stock investment opportunities based on the Obermatt Method. Only one of the consolidated Obermatt Ranks exhibits above-average performance, namely the Value Rank at a level of 81. All other ranks are below average, so proceed with caution. The company has below-average growth expectations (Growth Rank of 37), a riskier financing structure than the competition (Safety Rank of 18), and the market sentiment in the professional investor community ranking at (Sentiment Rank of 49) is negative. This combination is sensitive to a crisis, because high debt levels (low safety) require growth to finance the debt burden. It’s no wonder that the investor community indicators are skeptical (low 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. We recommend evaluating whether the future of Telefonica is as challenging as the low price of the stock suggests. Since the professional community is pessimistic, you might need to worry about the future of Telefonica. Only invest if you have solid reasons to believe that the low growth is temporary and the current market sentiment is an overreaction, possibly due to reputational issues in the past. ...read more
Sentiment Strategy: Professional Market Sentiment for Telefonica only reserved
ANALYSIS: With an Obermatt Sentiment Rank of 49 (better than 49% compared with alternatives), overall professional sentiment and engagement for the stock Telefonica is below industry average. The Sentiment Rank is based on consolidating four sentiment indicators, with half of the metrics below and half above average for Telefonica. Analyst Opinions are at a rank of 33 (worse than 67% 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 68, which means that stock research experts are more positive in their investment recommendations in the company. In other words, they are getting more optimistic of stock investments in Telefonica. More encouragingly, the Professional Investors rank is 70, which means that professional investors hold more stock in this company than in 70% of alternative investment opportunities. Pros tend to favor investing in this company. But Market Pulse is on the lower side with a rank of 24, which means that the current professional news and professional social networks are on the negative side when discussing this company (more negative news than for 76% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 49 (less encouraging than 51% compared with investment alternatives), Telefonica has a reputation among professional investors that is below that of its competitors. The sentiment signals are mixed for Telefonica. While analysts and the news channels are negative, there is a change in what analysts think. Above-average institutional investors in this company support them. Sentiment signals remain mixed with analysts and news channels pessimistic, though improving, and professional investors above average. ...read more
Value Strategy: Telefonica Stock Price Value at the top
ANALYSIS: With an Obermatt Value Rank of 81 (better than 81% compared with alternatives) for 2023, Telefonica shares are significantly less expensive than comparable stocks. The Value Rank is based on consolidating four value indicators that are all above average for Telefonica. Price-to-Sales is 79 which means that the stock price compared with what market professionals expect for future sales is lower than for 79% of comparable companies, indicating a good value for Telefonica's revenue size. The same is valid for expected Price-to-Profits, more favorable than for 55% 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 63. Compared with other companies in the same industry, dividend yields of Telefonica are expected to be higher than for 76% of all competitors (a Dividend Yield rank of 76). ...read more
RECOMMENDATION: The overall picture with a consolidated Value Rank of 81, is a buy recommendation based on Telefonica'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 Telefonica based on its detailed value metrics.
Growth Strategy: Telefonica Growth Momentum low
| GROWTH METRICS | September 14, 2023 | |||||||
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| REVENUE GROWTH | ||||||||
| REVENUE GROWTH | 10 |
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| PROFIT GROWTH | ||||||||
| PROFIT GROWTH | 43 |
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| CAPITAL GROWTH | ||||||||
| CAPITAL GROWTH | 82 |
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| STOCK RETURNS | ||||||||
| STOCK RETURNS | 53 |
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| CONSOLIDATED RANK: GROWTH | ||||||||
| CONSOLIDATED RANK: GROWTH | 37 |
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ANALYSIS: With an Obermatt Growth Rank of 37 (better than 37% compared with alternatives), Telefonica 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 half of the indicators below and half above average for Telefonica. Capital Growth has a rank of 82, which means that currently professionals expect the company to grow its invested capital more than 43% of its competitors. Investors welcomed this, visible in the Stock Returns rank of 53 (above 53% of alternative investments). But Sales Growth has only a rank of 10, which means that, currently, professionals expect the company to grow less than 90% of its competitors, and Profit Growth is also low at a rank of 43. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 37, is a hold recommendation for growth and momentum investors. This is an ambiguous picture. Revenue growth and capital growth are strong, but the growth in profit, which seems good, can also be an indication that growth momentum may be negative. The fact that stock returns have been above average doesn't help much, as stock returns are less reliable in showing a company’s future growth potential. Prices may perform well for the simple reason that investors were too pessimistic in the past and are now correcting their opinions and moving the stock price to a more reasonable level. As the growth picture is mixed for Telefonica, investors may want to look at value and sentiment indicators for a well-rounded picture of this stock. ...read more
Safety Strategy: Telefonica Debt Financing Safety risky
| SAFETY METRICS | September 14, 2023 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 28 |
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| REFINANCING | ||||||||
| REFINANCING | 31 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 37 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 18 |
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ANALYSIS: With an Obermatt Safety Rank of 18 (better than 18% compared with alternatives), the company Telefonica 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 Telefonica 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 Telefonica. 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 28, meaning the company has an above-average debt-to-equity ratio. It has more debt than 72% of its competitors. Finally, Refinancing is at a rank of 31 which means that the portion of the debt about to be refinanced is above average. It has more debt in the refinancing stage than 69% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 18 (worse than 82% compared with alternatives), Telefonica 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: Telefonica Below-Average Financial Performance
| COMBINED PERFORMANCE | September 14, 2023 | |||||||
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| VALUE | ||||||||
| VALUE | 81 |
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| GROWTH | ||||||||
| GROWTH | 37 |
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| SAFETY | ||||||||
| SAFETY | 37 |
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| COMBINED | ||||||||
| COMBINED | 37 |
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ANALYSIS: With an Obermatt Combined Rank of 37 (worse than 63% compared with investment alternatives), Telefonica (Integrated Telecommunication, Spain) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Telefonica are a good value (attractively priced) with a consolidated Value Rank of 81 (better than 81% of alternatives) but show below-average growth (Growth Rank of 37), and are riskily financed (Safety Rank of 18), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 37, is a hold recommendation based on Telefonica's financial characteristics. As the company Telefonica's key financial metrics exhibit good value (Obermatt Value Rank of 81) but low growth (Obermatt Growth Rank of 37) and risky financing practices (Obermatt Safety Rank of 18), it may be a risky investment, because debt in times of crises can make things worse. The good value, better than 81% 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
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