Value
5.7/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 6.7 |
| P/S | 8.6 |
| EV/EBITDA | 4.3 |
| Fwd P/E | 7.6 |
| PEG | 3.9 |
| Analyst target | 4.0 |
- ▸Forward P/E: 16.2x
- ▸PEG: 2.75
BKH · Why this verdict
Why Black Hills (BKH) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score4.6/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Business quality sits at the minimum acceptable floor with no identifiable competitive moat, free cash flow is deeply negative, revenue is in decline, and the dividend yield appears unsafe — the fundamental picture argues for an exit rather than additional exposure despite constructive near-term technical momentum.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Free cash flow is negative, converting at roughly negative 169% of reported net income, meaning the company is not generating cash organically to match its stated earnings — the most significant earnings-quality red flag in the fundamental picture. Quality | If the thesis holds, free cash flow conversion remains negative for the next two annual reporting periods, confirming the cash-generation shortfall is persistent. | →Stable |
| CounterTechnical momentum has been building — the stock has established a golden cross, trades above its 200-day moving average, and exhibits rising on-balance volume — suggesting market participants may be pricing in a future improvement in cash generation ahead of reported results. | ||
Business quality sits at the minimum acceptable floor, with weak returns on assets and equity, no identifiable competitive moat, and an overall quality profile that ranks near the bottom of the peer universe. Warnings | If the thesis holds, balance-sheet quality remains depressed — Piotroski balance-sheet health score stays below 5 out of 9 — without meaningful improvement over the next two annual periods. | →Stable |
| CounterAnalyst sentiment is constructive, with an above-median rating and the momentum gate passing, suggesting the market may view the current quality discount as already priced into the stock. | ||
Revenue declined approximately 3% year-over-year, placing growth metrics near the bottom of the range and indicating the business is losing top-line scale rather than growing into its cost structure. Growth | If the thesis holds, year-over-year revenue growth remains negative for 2 or more consecutive quarters, confirming a structural contraction pattern. | →Stable |
| CounterThe two oldest trailing quarters both beat estimates — by 13.9% and 5.6% respectively — suggesting the company retains some ability to surprise positively even in a soft revenue environment through cost discipline. | ||
Despite a high headline yield, the dividend payout has been flagged as potentially unsafe given the current trajectory of earnings and free cash flow, creating yield-trap risk for income-oriented holders who may be misreading the distribution as sustainable. Catalyst | If the thesis holds, free cash flow coverage of the dividend remains insufficient — FCF/NI stays below 50% — for 2 or more consecutive annual periods, confirming the yield is structurally uncovered. | →Stable |
| CounterManagement has strong incentives to defend the dividend payout to avoid triggering income-investor selling; the constructive analyst tone suggests consensus is not currently modeling a near-term cut. | ||
Free cash flow is negative, converting at roughly negative 169% of reported net income, meaning the company is not generating cash organically to match its stated earnings — the most significant earnings-quality red flag in the fundamental picture.
→StableQuality
- Expectation
- If the thesis holds, free cash flow conversion remains negative for the next two annual reporting periods, confirming the cash-generation shortfall is persistent.
CounterTechnical momentum has been building — the stock has established a golden cross, trades above its 200-day moving average, and exhibits rising on-balance volume — suggesting market participants may be pricing in a future improvement in cash generation ahead of reported results.
Business quality sits at the minimum acceptable floor, with weak returns on assets and equity, no identifiable competitive moat, and an overall quality profile that ranks near the bottom of the peer universe.
→StableWarnings
- Expectation
- If the thesis holds, balance-sheet quality remains depressed — Piotroski balance-sheet health score stays below 5 out of 9 — without meaningful improvement over the next two annual periods.
CounterAnalyst sentiment is constructive, with an above-median rating and the momentum gate passing, suggesting the market may view the current quality discount as already priced into the stock.
Revenue declined approximately 3% year-over-year, placing growth metrics near the bottom of the range and indicating the business is losing top-line scale rather than growing into its cost structure.
→StableGrowth
- Expectation
- If the thesis holds, year-over-year revenue growth remains negative for 2 or more consecutive quarters, confirming a structural contraction pattern.
CounterThe two oldest trailing quarters both beat estimates — by 13.9% and 5.6% respectively — suggesting the company retains some ability to surprise positively even in a soft revenue environment through cost discipline.
Despite a high headline yield, the dividend payout has been flagged as potentially unsafe given the current trajectory of earnings and free cash flow, creating yield-trap risk for income-oriented holders who may be misreading the distribution as sustainable.
→StableCatalyst
- Expectation
- If the thesis holds, free cash flow coverage of the dividend remains insufficient — FCF/NI stays below 50% — for 2 or more consecutive annual periods, confirming the yield is structurally uncovered.
CounterManagement has strong incentives to defend the dividend payout to avoid triggering income-investor selling; the constructive analyst tone suggests consensus is not currently modeling a near-term cut.
Per-dimension breakdown
Quality
4.0/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.6 |
| ROA | 2.1 |
| Gross margin | 3.8 |
| Op margin | 10.0 |
| Net margin | 6.3 |
| Current ratio | 2.6 |
| FCF quality | 0.0 |
| Moat | 3.9 |
| Piotroski F | 4.4 |
- ▸Earnings quality RED FLAG: -169% FCF/NI
- ▸No competitive moat
Growth
1.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 1.8 |
| EPS growth | 0.5 |
- ▸Declining revenue: -3%
Momentum
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 0.0 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.3 |
| Price target | 6.6 |
| erm sentiment | 5.0 |
- ▸Light analyst coverage (5.0) — signal dampened
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Insider selling (low materiality) — $304,970 (0.005% of mkt cap)
Peer rank
4.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.5 |
| quality rank | 3.9 |
| growth rank | 3.6 |
Technical
3.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.0 |
| support resistance | 0.0 |
| 52w position | 9.2 |
Risk (lower is worse)
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 2.6 |
| days to cover | 0.1 |
| volatility | 5.7 |
| put call | 10.0 |
| implied vol | 7.4 |
| beta | 8.8 |
| debt equity | 4.7 |
- ▸Concentration risks: 2 MED (10-K Item 1A)
Catalyst
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 6.0 |
| earnings history | 5.6 |
| earnings timing | 5.0 |
| surprise avg | 5.3 |
| dividend safety | 4.2 |
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCKPassed (7)
- MOMENTUM:6.9>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:34d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.3=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.32
Upside
-3.2%
Downside
10.0%
Sizing output
AVOID
SetupBREAKOUT — Golden cross, above all MAs, RSI 59, MACD bullish
EdgeNO_EDGE — No clear edge identified
SuitabilityMODERATE — Balanced profile
Investment implication
The L1 gate blocked the positive-verdict path: a hard-floor threshold was breached, so dimensional pillars — including Momentum at 6.9 could not lift the engine output above the verdict floor. Failed gate signal: ASYMMETRY:-0.3=NEGATIVE.
The strongest dimensions are Momentum at 6.9, Sentiment at 6.5, and Value at 5.7; the weakest are Growth at 1.1, Technical at 3.4, and Quality at 4.0. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.32 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Free cash flow is negative, converting at roughly negative 169% of reported net income, meaning the company is not generating cash organically to match its stated earnings — the most significant earnings-quality red flag in the fundamental picture.
Trip ifFCF/NI ratio exceeds 0% for 2 consecutive annual periods, confirming free cash flow has turned positive.
- P2Business quality sits at the minimum acceptable floor, with weak returns on assets and equity, no identifiable competitive moat, and an overall quality profile that ranks near the bottom of the peer universe.
Trip ifPiotroski balance-sheet health score rises above 7 out of 9 for 2 consecutive reported periods, confirming franchise quality has materially improved.
- P3Revenue declined approximately 3% year-over-year, placing growth metrics near the bottom of the range and indicating the business is losing top-line scale rather than growing into its cost structure.
Trip ifYear-over-year revenue growth exceeds 5% for 2 consecutive quarters, confirming the contraction trend has reversed.
- P4Despite a high headline yield, the dividend payout has been flagged as potentially unsafe given the current trajectory of earnings and free cash flow, creating yield-trap risk for income-oriented holders who may be misreading the distribution as sustainable.
Trip ifFCF/NI ratio exceeds 60% for 2 consecutive annual periods, indicating the dividend is covered by organic cash generation.