Value
9.1/10data confidence 67%| Component | Sub-score |
|---|---|
| P/E | 4.6 |
| P/S | 9.9 |
| EV/EBITDA | 8.7 |
| PEG | 10.0 |
- ▸PEG: 0.34
- ▸Attractively valued
FORTY · Why this verdict
Why Formula Systems (1985) (FORTY) 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 score6.0/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Attractive valuation metrics and best-in-class margins present a compelling long-term case, but a confirmed negative price trend, three consecutive earnings misses, and a dividend payout of 211% of earnings raise near-term concerns that need to resolve before the value case can be acted on.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The stock carries a PEG ratio of 0.37 and is described as attractively valued, suggesting the market is not fully pricing in the company's growth potential relative to its current earnings. Bull case | The discount closes over 12 months as earnings growth materializes, moving the P/E multiple toward levels consistent with the growth rate. | →Stable |
| CounterThree consecutive earnings misses have eroded the credibility of earnings estimates, meaning the PEG ratio may be understated if forward earnings are revised down further—making the cheap multiple an artifact of optimistic consensus rather than genuine undervaluation. | ||
The company posts a 23% net margin, which the peer analysis flags as best-in-class, indicating a structurally profitable business with cost discipline uncommon among information technology services peers. Quality breakdown | Net margin stays above 20% for the next two reported periods, confirming margin durability. | →Stable |
| CounterThe growth dimension notes show declining evidence of revenue momentum, and if revenue contracts, even a high-margin structure can see absolute earnings erode—operating leverage cuts both ways. | ||
The stock is in a confirmed technical downtrend—below all major moving averages with a death cross formation, RSI at 32, and falling on-balance volume—indicating that sellers are in control and that near-term price action is likely to remain under pressure. Momentum breakdown | This pillar is falsified if the stock reclaims its 200-day moving average and the death cross reverses within the next 3 months. | →Stable |
| CounterThe notes indicate the long-term moving average is still rising at +1.9% per month, suggesting this may be a pullback within a longer uptrend rather than a structural break—the downtrend could be temporary. | ||
The dividend payout ratio stands at 211% of earnings, meaning the company is paying out more than twice its reported earnings as dividends—a level that is likely unsustainable without either earnings recovery or a dividend cut. Catalyst breakdown | This pillar is falsified if reported earnings recover such that the payout ratio falls below 100% within the next two fiscal years. | →Stable |
| CounterThree consecutive earnings misses may reflect stale or erroneous historical earnings data (the most recent quarterly dates shown are from 2000–2001), and the actual current payout ratio could differ materially if the earnings base has changed. | ||
The stock carries a PEG ratio of 0.37 and is described as attractively valued, suggesting the market is not fully pricing in the company's growth potential relative to its current earnings.
→StableBull case
- Expectation
- The discount closes over 12 months as earnings growth materializes, moving the P/E multiple toward levels consistent with the growth rate.
CounterThree consecutive earnings misses have eroded the credibility of earnings estimates, meaning the PEG ratio may be understated if forward earnings are revised down further—making the cheap multiple an artifact of optimistic consensus rather than genuine undervaluation.
The company posts a 23% net margin, which the peer analysis flags as best-in-class, indicating a structurally profitable business with cost discipline uncommon among information technology services peers.
→StableQuality breakdown
- Expectation
- Net margin stays above 20% for the next two reported periods, confirming margin durability.
CounterThe growth dimension notes show declining evidence of revenue momentum, and if revenue contracts, even a high-margin structure can see absolute earnings erode—operating leverage cuts both ways.
The stock is in a confirmed technical downtrend—below all major moving averages with a death cross formation, RSI at 32, and falling on-balance volume—indicating that sellers are in control and that near-term price action is likely to remain under pressure.
→StableMomentum breakdown
- Expectation
- This pillar is falsified if the stock reclaims its 200-day moving average and the death cross reverses within the next 3 months.
CounterThe notes indicate the long-term moving average is still rising at +1.9% per month, suggesting this may be a pullback within a longer uptrend rather than a structural break—the downtrend could be temporary.
The dividend payout ratio stands at 211% of earnings, meaning the company is paying out more than twice its reported earnings as dividends—a level that is likely unsustainable without either earnings recovery or a dividend cut.
→StableCatalyst breakdown
- Expectation
- This pillar is falsified if reported earnings recover such that the payout ratio falls below 100% within the next two fiscal years.
CounterThree consecutive earnings misses may reflect stale or erroneous historical earnings data (the most recent quarterly dates shown are from 2000–2001), and the actual current payout ratio could differ materially if the earnings base has changed.
Per-dimension breakdown
Quality
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.9 |
| Gross margin | 0.0 |
| Op margin | 4.4 |
| Net margin | 10.0 |
| Current ratio | 6.0 |
| Moat | 5.6 |
| Piotroski F | 7.8 |
- ▸Strong margins: 23%
- ▸Strong Piotroski F-Score: 7/9
Growth
8.7/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 7.3 |
| EPS growth | 10.0 |
Momentum
1.6/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.0 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 2.2 |
- ▸Capitulation risk (RSI 14, below 200MA)
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA but MA still rising (+1.3%/30d) — pullback in uptrend, not confirmed weakness
Sentiment
5.0/10data confidence 33%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
Insider
5.0/10data confidence 50%Peer rank
4.4/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.8 |
| quality rank | 5.9 |
| growth rank | 7.9 |
- ▸Best-in-class margins
Technical
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 9.1 |
| support resistance | 10.0 |
| 52w position | 2.0 |
Risk (lower is worse)
8.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 10.0 |
| days to cover | 9.9 |
| volatility | 4.8 |
| beta | 10.0 |
| debt equity | 8.5 |
Catalyst
2.8/10data confidence 100%| Component | Sub-score |
|---|---|
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 6.0 |
- ▸Earnings concerns: 1B/3M
- ▸Dividend: 233.0%
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more. | News modifier -1 (HOLD_IF_HOLDING → SELL_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_HOLD|L3:NEWS_MOD=-1Passed (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:56d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- MOMENTUM:1.6<4.5
Warning (1)
- ASYMMETRY:UPSIDE_EXHAUSTED (upside=0.0%)
Reward-to-Risk
0.00
Upside
+0.0%
Downside
6.2%
Sizing output
AVOID
SetupFALLING_KNIFE — Death cross, below all MAs, RSI 14, MACD bearish
EdgeNO_EDGE — No clear edge identified
SuitabilityAGGRESSIVE — MCap $1.6B<$5B
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: INSIDER:OK. Top dim: Value at 9.1; weakest: Momentum at 1.6. No conviction either direction.
The strongest dimensions are Value at 9.1, Growth at 8.7, and Risk (lower is worse) at 8.6; the weakest are Momentum at 1.6, Catalyst at 2.8, and Peer rank at 4.4. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 0.00 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1The stock carries a PEG ratio of 0.37 and is described as attractively valued, suggesting the market is not fully pricing in the company's growth potential relative to its current earnings.
Trip ifConsensus EPS estimates are revised down by more than 20% over any 2-quarter period.
- P2The company posts a 23% net margin, which the peer analysis flags as best-in-class, indicating a structurally profitable business with cost discipline uncommon among information technology services peers.
Trip ifNet margin falls below 15% for 2 consecutive reported periods.
- P3The stock is in a confirmed technical downtrend—below all major moving averages with a death cross formation, RSI at 32, and falling on-balance volume—indicating that sellers are in control and that near-term price action is likely to remain under pressure.
Trip ifStock reclaims the 200-day moving average and holds above it for 30 consecutive trading days.
- P4The dividend payout ratio stands at 211% of earnings, meaning the company is paying out more than twice its reported earnings as dividends—a level that is likely unsustainable without either earnings recovery or a dividend cut.
Trip ifDividend payout ratio falls below 100% of earnings for 2 consecutive fiscal years.