Value
4.0/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 0.0 |
| P/S | 0.0 |
| Fwd P/E | 2.5 |
| PEG | 10.0 |
| Analyst target | 7.5 |
- ▸Forward P/E: 45.7x
- ▸PEG: 0.21
LITE · Why this verdict
Why Lumentum Holdings (LITE) 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 score5.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Ninety percent year-over-year revenue growth, four consecutive earnings beats, and best-in-class margins within the peer group establish a compelling growth profile — but free cash flow converts at only 21 cents per dollar of net income, the shares trade at a forward P/E above 52 times, and dependence on sole-source suppliers introduces supply chain fragility that could disrupt execution.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue expanded 90% year over year, placing the company at the top of its industry peer group for growth — a pace that, even partially sustained, would substantially grow the earnings base against which the current forward multiple is measured. Growth breakdown | Revenue growth remains above 40% year over year for at least 2 consecutive quarters, sustaining a high-growth trajectory. | →Stable |
| CounterTriple-digit percentage growth rates rarely persist; a high base effect could quickly compress reported year-over-year growth, disappointing investors who are pricing in an extended expansion at or near the current pace. | ||
The company has beaten consensus earnings estimates in each of the last four quarters, with an average positive surprise of roughly 10% — a track record suggesting management has maintained disciplined guidance relative to delivered results across a period of rapid growth. Catalyst breakdown | EPS surprise remains positive for each of the next four reported quarters, maintaining the unbroken beat streak. | →Stable |
| CounterIn a high-expectation environment anchored to 90% revenue growth, a narrowing beat margin or a first miss could trigger a sharp valuation reset on a stock trading above 52 times forward earnings; the bar rises with each strong quarter. | ||
Operating margins of roughly 18% rank at the top of the peer group — a margin profile that, combined with industry-leading growth, suggests the company is scaling efficiently rather than buying revenue at the expense of profitability. Peer-rank breakdown | Operating margin holds above 15% for 4 consecutive quarters, confirming the margin leadership is structural rather than cyclical. | →Stable |
| CounterBest-in-class margins at 90% growth rates can reflect a favorable revenue mix or pricing conditions specific to the current cycle; if the product mix shifts or pricing normalizes, margins could compress rapidly. | ||
Despite strong reported earnings, free cash flow amounts to only 21% of net income — explicitly flagged as a quality concern — indicating that earnings are not translating into cash at a rate commensurate with the headline profitability or the premium multiple the stock commands. Quality breakdown | FCF-to-net-income ratio rises above 75% within the next two annual reporting periods, indicating cash conversion has normalized. | →Stable |
| CounterLow free cash flow relative to earnings during a phase of 90% revenue growth can reflect aggressive investment in infrastructure or inventory; cash conversion may improve materially as capital spending moderates once growth normalizes. | ||
Revenue expanded 90% year over year, placing the company at the top of its industry peer group for growth — a pace that, even partially sustained, would substantially grow the earnings base against which the current forward multiple is measured.
→StableGrowth breakdown
- Expectation
- Revenue growth remains above 40% year over year for at least 2 consecutive quarters, sustaining a high-growth trajectory.
CounterTriple-digit percentage growth rates rarely persist; a high base effect could quickly compress reported year-over-year growth, disappointing investors who are pricing in an extended expansion at or near the current pace.
The company has beaten consensus earnings estimates in each of the last four quarters, with an average positive surprise of roughly 10% — a track record suggesting management has maintained disciplined guidance relative to delivered results across a period of rapid growth.
→StableCatalyst breakdown
- Expectation
- EPS surprise remains positive for each of the next four reported quarters, maintaining the unbroken beat streak.
CounterIn a high-expectation environment anchored to 90% revenue growth, a narrowing beat margin or a first miss could trigger a sharp valuation reset on a stock trading above 52 times forward earnings; the bar rises with each strong quarter.
Operating margins of roughly 18% rank at the top of the peer group — a margin profile that, combined with industry-leading growth, suggests the company is scaling efficiently rather than buying revenue at the expense of profitability.
→StablePeer-rank breakdown
- Expectation
- Operating margin holds above 15% for 4 consecutive quarters, confirming the margin leadership is structural rather than cyclical.
CounterBest-in-class margins at 90% growth rates can reflect a favorable revenue mix or pricing conditions specific to the current cycle; if the product mix shifts or pricing normalizes, margins could compress rapidly.
Despite strong reported earnings, free cash flow amounts to only 21% of net income — explicitly flagged as a quality concern — indicating that earnings are not translating into cash at a rate commensurate with the headline profitability or the premium multiple the stock commands.
→StableQuality breakdown
- Expectation
- FCF-to-net-income ratio rises above 75% within the next two annual reporting periods, indicating cash conversion has normalized.
CounterLow free cash flow relative to earnings during a phase of 90% revenue growth can reflect aggressive investment in infrastructure or inventory; cash conversion may improve materially as capital spending moderates once growth normalizes.
Per-dimension breakdown
Quality
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 7.6 |
| ROA | 1.9 |
| Gross margin | 4.2 |
| Op margin | 8.7 |
| Net margin | 8.8 |
| Current ratio | 4.4 |
| FCF quality | 1.7 |
| Moat | 6.8 |
| Piotroski F | 7.8 |
- ▸Strong margins: 18%
- ▸Earnings quality RED FLAG: 21% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
10.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 10.0 |
| EPS growth | 10.0 |
- ▸Strong growth: 90% YoY
Momentum
2.4/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 4.0 |
| Volume | 1.5 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.5 |
| Price target | 8.7 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 32%
Insider
3.9/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Modest insider selling — $38,859,209 (0.060% of mkt cap)
Peer rank
4.6/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.2 |
| quality rank | 7.7 |
| growth rank | 9.5 |
- ▸Best-in-class margins
- ▸Industry growth leader
Technical
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 7.4 |
| support resistance | 7.6 |
| 52w position | 5.5 |
Risk (lower is worse)
4.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 2.7 |
| days to cover | 9.3 |
| volatility | 0.0 |
| put call | 6.6 |
| implied vol | 0.0 |
| beta | 5.1 |
| debt equity | 4.8 |
- ▸High IV: 104%
- ▸Concentration risks: 1 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 7.4 |
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:49d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:2.4<4.5
- ASYMMETRY:1.2<1.5@spot
Warning (0)
none
Reward-to-Risk
1.25
Upside
+18.7%
Downside
15.0%
Sizing output
AVOID
SetupUNKNOWN — No clear chart pattern; technical signals are mixed
EdgeNO_EDGE — No clear edge identified
SuitabilityAGGRESSIVE — Beta 1.48>1.3
Investment implication
The F-path SELL output reflects an overall score of 5.2 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Growth at 10.0) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:2.4<4.5, ASYMMETRY:1.2<1.5@spot) reinforce the read. Current asymmetry R:R is 1.25 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 10.0, Sentiment at 7.2, and Technical at 6.8; the weakest are Momentum at 2.4, Insider at 3.9, and Value at 4.0. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 1.25 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Revenue expanded 90% year over year, placing the company at the top of its industry peer group for growth — a pace that, even partially sustained, would substantially grow the earnings base against which the current forward multiple is measured.
Trip ifRevenue growth falls below 30% year over year for 2 consecutive quarters, indicating the growth rate has decelerated materially from the current 90% pace.
- P2The company has beaten consensus earnings estimates in each of the last four quarters, with an average positive surprise of roughly 10% — a track record suggesting management has maintained disciplined guidance relative to delivered results across a period of rapid growth.
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, breaking the beat streak.
- P3Operating margins of roughly 18% rank at the top of the peer group — a margin profile that, combined with industry-leading growth, suggests the company is scaling efficiently rather than buying revenue at the expense of profitability.
Trip ifOperating margin falls below 15% for 2 consecutive quarters, indicating margin leadership has eroded.
- P4Despite strong reported earnings, free cash flow amounts to only 21% of net income — explicitly flagged as a quality concern — indicating that earnings are not translating into cash at a rate commensurate with the headline profitability or the premium multiple the stock commands.
Trip ifFCF-to-net-income ratio rises above 75% for 2 consecutive annual periods, indicating cash conversion has recovered and the concern is resolved.