Value
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 6.4 |
| P/S | 9.5 |
| EV/EBITDA | 5.5 |
| Fwd P/E | 8.3 |
| PEG | 6.9 |
| Analyst target | 6.0 |
- ▸Forward P/E: 14.1x
- ▸PEG: 1.02
- ▸Attractively valued
ALG · Why this verdict
Why Alamo Group (ALG) 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 score4.9/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
At a forward price-to-earnings of 12.6 times and a PEG ratio of 0.91, the stock screens as attractively valued relative to peers — a factor that limits downside even as earnings execution has been inconsistent. Valuation breakdown | The forward multiple expanding to 15 times as earnings delivery improves and analyst estimates stabilize would signal the valuation discount is closing. | →Stable |
| CounterA low multiple can reflect a value trap if underlying earnings power is declining; three consecutive misses before the recent beat suggest the bar has been repeatedly set too high, and the earnings quality warning on cash conversion adds uncertainty about whether reported earnings overstate true profitability. | ||
The stock is in a confirmed downtrend — trading below its 200-day moving average with the long-term average declining at 5.2% over 30 days and on-balance volume falling — technical conditions that create resistance to price recovery even when fundamental catalysts emerge. Momentum breakdown | Price closing above the 200-day moving average and sustaining that level for more than 15 consecutive trading days would signal the downtrend has reversed. | →Stable |
| CounterThe MACD is improving despite the death cross and RSI is at 49, suggesting early-stage stabilization rather than continued steep decline — the technical picture may be worse than the underlying business momentum implies. | ||
The three quarters prior to the most recent beat produced earnings misses averaging more than 14% below consensus — a streak that suggests either management's guidance framework has been set too high or underlying demand trends are softer than the market expects. Earnings | Two consecutive positive EPS surprises above 5% would indicate the execution gap has closed and guidance calibration has reset to a deliverable level. | →Stable |
| CounterThe most recent quarter produced a 16% positive surprise, which may mark the start of a guidance reset cycle where the bar has been sufficiently lowered for the business to over-deliver going forward. | ||
Free cash flow converts at only 57% of net income — an earnings quality warning suggesting reported earnings may overstate the cash the business is actually generating, which complicates valuation and raises questions about dividend sustainability. Quality breakdown | Free-cash-flow-to-net-income ratio rising above 80% for two consecutive quarters would confirm improving cash conversion and reduce uncertainty around the quality of reported earnings. | →Stable |
| CounterA Piotroski F-Score of 7 out of 9 reflects solid balance sheet health overall; the FCF shortfall relative to net income may reflect a temporary capital spending cycle rather than structural earnings inflation. | ||
At a forward price-to-earnings of 12.6 times and a PEG ratio of 0.91, the stock screens as attractively valued relative to peers — a factor that limits downside even as earnings execution has been inconsistent.
→StableValuation breakdown
- Expectation
- The forward multiple expanding to 15 times as earnings delivery improves and analyst estimates stabilize would signal the valuation discount is closing.
CounterA low multiple can reflect a value trap if underlying earnings power is declining; three consecutive misses before the recent beat suggest the bar has been repeatedly set too high, and the earnings quality warning on cash conversion adds uncertainty about whether reported earnings overstate true profitability.
The stock is in a confirmed downtrend — trading below its 200-day moving average with the long-term average declining at 5.2% over 30 days and on-balance volume falling — technical conditions that create resistance to price recovery even when fundamental catalysts emerge.
→StableMomentum breakdown
- Expectation
- Price closing above the 200-day moving average and sustaining that level for more than 15 consecutive trading days would signal the downtrend has reversed.
CounterThe MACD is improving despite the death cross and RSI is at 49, suggesting early-stage stabilization rather than continued steep decline — the technical picture may be worse than the underlying business momentum implies.
The three quarters prior to the most recent beat produced earnings misses averaging more than 14% below consensus — a streak that suggests either management's guidance framework has been set too high or underlying demand trends are softer than the market expects.
→StableEarnings
- Expectation
- Two consecutive positive EPS surprises above 5% would indicate the execution gap has closed and guidance calibration has reset to a deliverable level.
CounterThe most recent quarter produced a 16% positive surprise, which may mark the start of a guidance reset cycle where the bar has been sufficiently lowered for the business to over-deliver going forward.
Free cash flow converts at only 57% of net income — an earnings quality warning suggesting reported earnings may overstate the cash the business is actually generating, which complicates valuation and raises questions about dividend sustainability.
→StableQuality breakdown
- Expectation
- Free-cash-flow-to-net-income ratio rising above 80% for two consecutive quarters would confirm improving cash conversion and reduce uncertainty around the quality of reported earnings.
CounterA Piotroski F-Score of 7 out of 9 reflects solid balance sheet health overall; the FCF shortfall relative to net income may reflect a temporary capital spending cycle rather than structural earnings inflation.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Alamo Group screens attractively valued at a forward price-to-earnings of 12.6 times with 20% analyst upside — but three consecutive earnings misses before the most recent beat, a confirmed price downtrend, and a free-cash-flow conversion warning at 57% of net income create a setup that favors waiting for evidence of execution improvement before initiating.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.0 |
| ROA | 3.8 |
| Gross margin | 0.9 |
| Op margin | 4.0 |
| Net margin | 3.1 |
| Current ratio | 8.7 |
| FCF quality | 4.5 |
| Moat | 5.8 |
| Piotroski F | 7.8 |
- ▸Earnings quality warning: 57% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
2.2/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.2 |
| EPS growth | 0.3 |
Momentum
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 2.8 |
| MACD | 10.0 |
| OBV | 1.2 |
| MA position | 6.0 |
| Volume | 3.7 |
- ▸Overbought bear rally (RSI 74)
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -4.8%/30d — confirmed downtrend
Sentiment
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 6.5 |
| Price target | 8.0 |
| erm sentiment | 5.0 |
- ▸Light analyst coverage (5.0) — signal dampened
- ▸Analyst upside: 23%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
5.4/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.6 |
| quality rank | 5.0 |
| growth rank | 5.9 |
Technical
2.2/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.9 |
| support resistance | 0.9 |
| 52w position | 4.7 |
Risk (lower is worse)
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.2 |
| days to cover | 7.8 |
| volatility | 4.1 |
| put call | 10.0 |
| implied vol | 5.4 |
| beta | 6.6 |
| debt equity | 9.0 |
Catalyst
3.4/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 7.0 |
- ▸Earnings concerns: 1B/3M
- ▸Dividend: 78.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:4.7>=4.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:32d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:0.6<1.5@spot
- DEATH_CROSS:HARD_BLOCK
Warning (2)
- MOMENTUM:4.7<5.5 (soft — BUY_NOW allowed but watch)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.57
Upside
+7.2%
Downside
12.8%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 74
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $2.1B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.9 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Risk (lower is worse) at 7.2) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.6<1.5@spot, DEATH_CROSS:HARD_BLOCK) reinforce the read. Current asymmetry R:R is 0.57 — supplementary context, not the trigger for this path.
The strongest dimensions are Risk (lower is worse) at 7.2, Value at 7.1, and Sentiment at 6.6; the weakest are Technical at 2.2, Growth at 2.2, and Catalyst at 3.4. The V9 engine flagged 2 failed gates with 2 warnings, producing an asymmetric reward-to-risk of 0.57 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Attractive Valuation Provides Downside Floor
Trip ifForward P/E re-rates above 18 times, signaling the market believes the valuation discount has fully closed.
- P2Death Cross Confirmed Downtrend
Trip ifStock closes above the 200-day moving average and sustains the level for more than 15 consecutive trading days.
- P3Three Consecutive Earnings Misses
Trip ifEPS surprise exceeds 5% for 2 consecutive quarters.
- P4Earnings Quality Warning Fcf Conversion
Trip ifFree-cash-flow-to-net-income ratio rises above 90% for 2 consecutive quarters.