Value
8.7/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 9.2 |
| P/S | 9.7 |
| EV/EBITDA | 9.0 |
| Fwd P/E | 9.7 |
| PEG | 10.0 |
| Analyst target | 5.0 |
- ▸Forward P/E: 7.1x
- ▸PEG: 0.27
- ▸Attractively valued
ADT · Why this verdict
Why ADT (ADT) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
Show full disclosure ▾Hide full disclosure ▴
About TrendMatrix. TrendMatrix is a publisher of general securities research and market commentary. We publish on a regular schedule. All content is the same for every subscriber in a tier — we do not provide personalized investment advice and we do not take into account any individual subscriber's financial situation, investment objectives, risk tolerance, tax situation, or holdings.
Not investment advice. TrendMatrix is not a registered investment adviser. Our content is for informational and educational purposes only. Consult your own licensed investment adviser, broker, or tax professional before making any investment decision.
Conflicts and positions. The TrendMatrix editorial team frequently holds personal long-term positions in securities discussed. We disclose positions held at the time of publication on each piece. We maintain a trading-window policy: we do not initiate or close positions in the same direction as a TrendMatrix publication within 24 hours before or 72 hours after publication.
No paid promotion. TrendMatrix does not accept payment from any issuer, broker, or third party in exchange for coverage of any security. Our sole compensation is subscription revenue.
No fiduciary duty. No fiduciary, advisory, or agency relationship is created between you and TrendMatrix by reading our content or subscribing to our service.
Performance. Past performance is not indicative of future results. Performance figures reflect the published model only and do not reflect any individual subscriber's actual results.
VerdictSELL
Overall score6.0/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
At a forward price-to-earnings of 6.9x and a PEG ratio of 0.26, the stock screens in the top tier of valuation attractiveness versus peers, with analysts implying approximately 22% upside from current levels. Valuation breakdown | Forward earnings estimates remain stable or rise over the next 12 months, maintaining the forward P/E below 10x and keeping the stock among the cheapest in its peer group on earnings yield. | →Stable |
| CounterA low multiple in a capital-intensive, leveraged business often reflects the market pricing in structural constraints on growth or cash returns; with a Rule of 40 score of 20 and a debt-to-equity ratio of 2.0, the multiple may be permanently discounted rather than a value opportunity. | ||
Free cash flow is converting at 158% of net income, indicating the business generates substantially more cash than accounting earnings suggest, which supports debt service capacity and potential capital return. Quality breakdown | Free cash flow conversion stays above 120% of net income for 2 consecutive reported quarters, confirming the cash generation is structural rather than timing-related. | →Stable |
| CounterFree cash flow converting well above net income can reflect favorable working-capital timing or deferred capital expenditure; if maintenance spending has been underspent, a catch-up cycle could compress free cash flow materially below net income. | ||
All four of the most recent quarterly earnings reports came in ahead of consensus estimates, with an average positive surprise of roughly 9%, suggesting management has a disciplined cadence of consistently delivering more than it promises. Earnings | The company extends the beat streak to a fifth consecutive quarter when reporting in approximately 44 days, with a positive EPS surprise of at least 5%. | →Stable |
| CounterThe modest revenue growth implied by a Rule of 40 score of 20 means earnings beats may be driven by cost discipline rather than demand expansion; cost-driven beats tend to be less repeatable once cost actions are exhausted. | ||
The stock has formed a death cross and sits below its 200-day moving average with the slope declining at roughly 2.9% over 30 days, while a put/call ratio of 5.72 is extremely elevated, indicating the options market is expressing a high degree of near-term caution about further downside. Risk breakdown | The put/call ratio falls below 2.0 and the price reclaims the 200-day moving average within 6 months, indicating the technical and sentiment overhang has cleared. | →Stable |
| CounterExtremely elevated put/call ratios can mark peak bearishness and serve as a contrarian indicator; if the fundamental beat streak continues, sentiment could reverse sharply as hedges unwind. | ||
At a forward price-to-earnings of 6.9x and a PEG ratio of 0.26, the stock screens in the top tier of valuation attractiveness versus peers, with analysts implying approximately 22% upside from current levels.
→StableValuation breakdown
- Expectation
- Forward earnings estimates remain stable or rise over the next 12 months, maintaining the forward P/E below 10x and keeping the stock among the cheapest in its peer group on earnings yield.
CounterA low multiple in a capital-intensive, leveraged business often reflects the market pricing in structural constraints on growth or cash returns; with a Rule of 40 score of 20 and a debt-to-equity ratio of 2.0, the multiple may be permanently discounted rather than a value opportunity.
Free cash flow is converting at 158% of net income, indicating the business generates substantially more cash than accounting earnings suggest, which supports debt service capacity and potential capital return.
→StableQuality breakdown
- Expectation
- Free cash flow conversion stays above 120% of net income for 2 consecutive reported quarters, confirming the cash generation is structural rather than timing-related.
CounterFree cash flow converting well above net income can reflect favorable working-capital timing or deferred capital expenditure; if maintenance spending has been underspent, a catch-up cycle could compress free cash flow materially below net income.
All four of the most recent quarterly earnings reports came in ahead of consensus estimates, with an average positive surprise of roughly 9%, suggesting management has a disciplined cadence of consistently delivering more than it promises.
→StableEarnings
- Expectation
- The company extends the beat streak to a fifth consecutive quarter when reporting in approximately 44 days, with a positive EPS surprise of at least 5%.
CounterThe modest revenue growth implied by a Rule of 40 score of 20 means earnings beats may be driven by cost discipline rather than demand expansion; cost-driven beats tend to be less repeatable once cost actions are exhausted.
The stock has formed a death cross and sits below its 200-day moving average with the slope declining at roughly 2.9% over 30 days, while a put/call ratio of 5.72 is extremely elevated, indicating the options market is expressing a high degree of near-term caution about further downside.
→StableRisk breakdown
- Expectation
- The put/call ratio falls below 2.0 and the price reclaims the 200-day moving average within 6 months, indicating the technical and sentiment overhang has cleared.
CounterExtremely elevated put/call ratios can mark peak bearishness and serve as a contrarian indicator; if the fundamental beat streak continues, sentiment could reverse sharply as hedges unwind.
TrendMatrix Research · core thesis
Engine thesis — one sentence
ADT trades at a significant discount to earnings — forward price-to-earnings of 6.9x, PEG of 0.26, and free cash flow converting at 158% of net income — with a four-quarter earnings beat streak, yet the favorable valuation is weighed against a confirmed technical downtrend, elevated financial leverage at a debt-to-equity ratio of 2.0, and an unusually high put/call ratio of 5.72 suggesting the options market is pricing in meaningful downside risk.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 5.6 |
| ROA | 3.5 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 6.1 |
| Current ratio | 3.4 |
| FCF quality | 10.0 |
| Moat | 5.8 |
| Rule of 40 | 3.0 |
| Piotroski F | 7.8 |
- ▸Excellent cash conversion: 158% FCF/NI
- ▸Rule of 40: 20 (fail)
- ▸Strong Piotroski F-Score: 7/9
Growth
5.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 2.7 |
| EPS growth | 7.3 |
Momentum
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.5 |
| MACD | 6.6 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 1.7 |
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -3.3%/30d — confirmed downtrend
Sentiment
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 6.5 |
| Price target | 7.6 |
| erm sentiment | 5.0 |
- ▸Light analyst coverage (5.0) — signal dampened
Insider
5.3/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.5 |
| holder change | 5.2 |
- ▸Insider buying (low materiality) — $477,415 (0.010% of mkt cap)
Peer rank
4.4/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 7.9 |
| quality rank | 4.5 |
| growth rank | 0.0 |
- ▸Attractive P/E vs peers
Technical
3.2/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.1 |
| support resistance | 1.1 |
| 52w position | 5.7 |
| gap | 5.0 |
Risk (lower is worse)
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.4 |
| days to cover | 7.2 |
| volatility | 5.9 |
| put call | 10.0 |
| implied vol | 6.1 |
| beta | 6.9 |
| debt equity | 3.0 |
Catalyst
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 7.0 |
| dividend safety | 7.0 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 322.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:5.8>=5.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:26d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.5<1.5@spot
Warning (2)
- DEATH_CROSS:momentum=5.8>=5.0 recovering
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.46
Upside
+3.9%
Downside
8.6%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 54
EdgeCatalyst-Driven — Earnings in 26d with 4/4 beat streak
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.5 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 8.7) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.5<1.5@spot) reinforce the read. Current asymmetry R:R is 0.46 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 8.7, Catalyst at 6.8, and Quality at 6.5; the weakest are Technical at 3.2, Peer rank at 4.4, and Growth at 5.0. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of 0.46 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Deep Value Low Multiple
Trip ifForward P/E rises above 12x as earnings estimates decline more than 15% from current levels.
- P2Strong Free Cash Flow Conversion
Trip ifFree cash flow conversion falls below 100% of net income for 2 consecutive quarters.
- P3Consistent Earnings Beat Streak
Trip ifEPS surprise stays below 0% for 2 consecutive quarters.
- P4Technical Weakness Options Skepticism
Trip ifPut/call ratio falls below 2.0 and price reclaims the 200-day moving average for 4 consecutive weeks.