February 1, 2024
Top 10 Stock Tesco Strong 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: Tesco – Top 10 Stock in FTSE 100 Index
Tesco is listed as a top 10 stock on February 01, 2024 in the market index FTSE 100 because of its high performance in at least one of the Obermatt investment strategies. As three out of four consolidated Obermatt Ranks exhibit excellent performance, it is a solid investment where the risk of paying too much for the shares is low. Based on the Obermatt 360° View of 81 (top 81% performer), Obermatt assesses an overall strong buy recommendation for Tesco on February 01, 2024.
Snapshot: Obermatt Ranks
| Country | United Kingdom |
| Industry | Food Retail |
| Index | FTSE All Shares, FTSE 100, FTSE 350, Dividends Europe, Employee Focus EU, Human Rights, Low Waste, Renewables Users |
| 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 Tesco Strong Buy
| 360 METRICS | February 1, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 72 |
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| GROWTH | ||||||||
| GROWTH | 53 |
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| SAFETY | ||||||||
| SAFETY | 20 |
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| SENTIMENT | ||||||||
| SENTIMENT | 100 |
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| 360° VIEW | ||||||||
| 360° VIEW | 81 |
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ANALYSIS: With an Obermatt 360° View of 81 (better than 81% compared with alternatives) for 2024, overall professional sentiment and financial characteristics for the stock Tesco are very positive. The 360° View is based on consolidating four consolidated indicators, with all but one indicator above average for Tesco. The consolidated Value Rank has an attractive rank of 72, which means that the share price of Tesco is on the lower side compared with the typical size in indicators such as revenues, profits, and invested capital. This means the stock price is lower than for 72% of alternative stocks in the same industry. The consolidated Growth Rank has a good rank of 53, 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. In addition, professional market sentiment is above average compared with other stock investment alternatives with a Sentiment Rank of 100. But the company’s financing is risky with a Safety rank of 20. This means 80% of comparable companies have a safer financing structure than Tesco. ...read more
RECOMMENDATION: With a consolidated 360° View of 81, Tesco is better positioned than 81% of all alternative stock investment opportunities based on the Obermatt Method. As three out of four consolidated Obermatt Ranks exhibit excellent performance, such as good value (Value Rank of 72), above-average growth (Growth Rank of 53), and positive market sentiment in the professional investor community (Sentiment Rank of 100), it is a solid stock investment where the risk of paying too much for the shares is limited, and disappointments are less likely, unless information not publicly available. Only the company financing structure is on the riskier side (Safety Rank of 20), but that would also mean better returns for shareholders if things work out well. Good value is sometimes an indication that the company's future is challenging. If they have been growing above average and are still a good value, it may indicate that this will not continue. We recommend evaluating whether the future of Tesco is as difficult as the low price of the stock, despite good growth and positive professional investor sentiment, suggests. Since the professional community is optimistic, you might have less to worry about, and the stock is just not sufficiently visible right now, which may indicate good timing. ...read more
Sentiment Strategy: Professional Market Sentiment for Tesco very positive
ANALYSIS: With an Obermatt Sentiment Rank of 100 (better than 100% compared with alternatives) for 2024, overall professional sentiment and engagement for the stock Tesco is very positive. The Sentiment Rank is based on consolidating four sentiment indicators, with all four indicators above average for Tesco. Analyst Opinions are at a rank of 64 (better than 64% of alternative investments), which means that, currently, stock research analysts tend to recommend a stock investment in the company. Analyst Opinions Change is also positive with a rank of 99, which means that stock research experts are changing their opinions for the better and recommending investing in the company. They are getting more optimistic about stock investments in Tesco. The Professional Investors rank is 86, which means that currently, professional investors hold more stock in this company than in 86% of alternative investment opportunities. Pros tend to favor investing in this company. Finally, Market Pulse has a rank of 87 which means that the current professional news and professional social networks are on the positive side when discussing this company (more positive news than for 87% of competitors). ...read more
RECOMMENDATION: With a consolidated Sentiment Rank of 100 (more positive than 100% compared with investment alternatives), Tesco has a reputation among professional investors that is significantly higher than that of its competitors. Since all market sentiment indicators are positive, the professional community highly recommends investment in the company. Does this mean Tesco stocks are a safe investment? Far from it. Even professionals make mistakes. Especially in stock investing, there is a tendency to follow the leaders. Since trees don't grow to the heavens, such positive sentiment may also be interpreted as a danger sign. A lot of optimism can often be a sign of troubles to come, albeit unforeseen by most. ...read more
Value Strategy: Tesco Stock Price Value better than average
ANALYSIS: With an Obermatt Value Rank of 72 (better than 72% compared with alternatives), Tesco shares are more attractively priced than the majority of comparable stocks. The Value Rank is based on consolidating four value indicators, where half the indicators are below and half above average for Tesco. Price-to-Sales (P/S) is 61, which means that the stock price compared with what market professionals expect for future sales is lower than for 61% of comparable companies, indicating a good value concerning Tesco's revenue size. The same is valid for dividend yields with a Dividend Yield rank of 84, which means that dividends are expected to be higher than for 84% 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 55% of alternatives (only 45% 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 51% 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 72, is a buy recommendation based on Tesco'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: Tesco Growth Momentum good
ANALYSIS: With an Obermatt Growth Rank of 53 (better than 53% compared with alternatives), Tesco shows an above-average growth dynamic in its industry. Investors also speak of positive momentum. The Growth Rank is based on consolidating four value indicators, with half of the indicators below and half above average for Tesco. Profit Growth has a rank of 58, which means that currently professionals expect the company to grow its profits more than 58% of its competitors. This is a good sign for shareholders, which is confirmed by an above-average Stock Returns rank of 84 (above 84% of alternative investments). But Sales Growth has a below the median rank of 24, which means that, currently, professionals expect the company to grow less than 76% of its competitors, and Capital Growth also has a lower rank of 38. ...read more
RECOMMENDATION: The overall picture with a consolidated Growth Rank of 53, is a buy recommendation for growth and momentum investors. Because revenues and invested capital are the more solid growth indicators, the positive development on the profit side is less relevant. It may have been caused by cost-cutting, which may be a negative growth indicator. Finally, the above-average stock returns recently are a thing of the past and not a good indicator of future returns. Investors should be confident that the cost-cutting initiative leading to higher profits is to benefit the company's future. If not, there is little growth momentum, and investment is only advisable if the Value Ranks suggest a good investment timing for Tesco. ...read more
Safety Strategy: Tesco Debt Financing Safety risky
| SAFETY METRICS | February 1, 2024 | |||||||
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| LEVERAGE | ||||||||
| LEVERAGE | 27 |
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| REFINANCING | ||||||||
| REFINANCING | 16 |
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| LIQUIDITY | ||||||||
| LIQUIDITY | 54 |
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| CONSOLIDATED RANK: SAFETY | ||||||||
| CONSOLIDATED RANK: SAFETY | 20 |
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ANALYSIS: With an Obermatt Safety Rank of 20 (better than 20% compared with alternatives), the company Tesco 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 Tesco 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 just one indicator above average for Tesco. Liquidity is at 54, meaning the company generates more profit to service its debt than 54% of its competitors. This indicates that the company is safer when it comes to debt service. But Refinancing is riskier 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. Leverage is also high at a rank of 27, which means that the company has an above-average debt-to-equity ratio. It has more debt than 73% of its competitors. ...read more
RECOMMENDATION: With a consolidated Safety Rank of 20 (worse than 80% compared with alternatives), Tesco has a financing structure that is significantly riskier than that of its competitors. High Leverage (a low Obermatt Leverage Rank) is good in good times, because it usually indicates that shareholders get higher returns. The good Liquidity performance of the company is an indicator that this is the case. However, if you expect an economic downturn, you may stay clear of this stock because they have an above-average debt level that needs refinancing soon. ...read more
Combined financial peformance: Tesco Below-Average Financial Performance
| COMBINED PERFORMANCE | February 1, 2024 | |||||||
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| VALUE | ||||||||
| VALUE | 72 |
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| GROWTH | ||||||||
| GROWTH | 53 |
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| SAFETY | ||||||||
| SAFETY | 54 |
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| COMBINED | ||||||||
| COMBINED | 49 |
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ANALYSIS: With an Obermatt Combined Rank of 49 (worse than 51% compared with investment alternatives), Tesco (Food Retail, United Kingdom) shares have somewhat below-average financial characteristics compared with similar stocks. Shares of Tesco are a good value (attractively priced) with a consolidated Value Rank of 72 (better than 72% of alternatives), show above-average growth (Growth Rank of 53) but are riskily financed (Safety Rank of 20), which means above-average debt burdens. ...read more
RECOMMENDATION: A Combined Rank of 49, is a hold recommendation based on Tesco's financial characteristics. As the company Tesco's key financial metrics exhibit excellent performance in two areas, such as good value (Obermatt Value Rank of 72) and above-average growth (Obermatt Growth Rank of 53), it could be argued that the risk-taking in financing (Obermatt Safety Rank of only 20) indicates that the company is optimistic about the future and sees debt as an opportunity to boost returns. More debt means more shareholder returns if everything goes well. However, higher debt burdens are risky when interest rates rise or the business deteriorates in a crisis. If you believe the company's future is market-typical or even better, this could be an argument for a share purchase. ...read more
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