Value
8.5/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.7 |
| P/S | 9.8 |
| EV/EBITDA | 6.9 |
| Fwd P/E | 9.5 |
| PEG | 10.0 |
| Analyst target | 6.0 |
- ▸Forward P/E: 8.7x
- ▸PEG: 0.08
- ▸Attractively valued
CMC · Why this verdict
Why Commercial Metals (CMC) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictHOLD
Overall score6.0/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
At a forward price-to-earnings ratio of 11.1x and a PEG of 0.04, the market prices in almost no earnings growth for a business that has produced 22% year-over-year earnings expansion — a setup that screens as deeply discounted relative to peers on a growth-adjusted basis. Valuation breakdown | Earnings per share grows more than 15% year over year for two consecutive quarters, confirming that the growth rate justifies a multiple re-rating toward peer levels. | →Stable |
| CounterMetal fabrication earnings can compress rapidly in a demand slowdown; the low multiple may reflect rational recognition of cyclicality rather than a mispricing, and growth could reverse quickly if infrastructure spending softens. | ||
The company has produced an alternating pattern — a miss at the oldest quarter, two consecutive beats, then a miss in the most recent quarter at -10.5% versus consensus — signaling that operational delivery remains uneven and that the beat track record is not durable. Earnings | EPS surprise exceeds 5% for three of the next four quarters, establishing a credible and consistent beat cadence. | →Stable |
| CounterIn commodity-linked businesses, earnings variability of this magnitude can reflect external pricing cycles rather than management execution; a metals pricing recovery could deliver beats independent of any internal improvement. | ||
Free cash flow represents only 29% of net income — a red-flag level of conversion that raises questions about whether reported profits translate into genuine cash available for shareholders, and the business lacks a recognized competitive moat to protect future earnings power. Quality breakdown | Free cash flow as a percentage of net income rises above 60% for two consecutive quarters, demonstrating that earnings are converting to cash at a sustainable rate. | →Stable |
| CounterFabrication businesses with active growth investments regularly show compressed near-term free cash flow; once capital projects complete and depreciation cycles catch up, the conversion ratio can normalize without reflecting any underlying structural problem. | ||
With only 1.7% of headroom to the near-term price ceiling, downside of 6.8% outpacing upside produces a risk/reward ratio of 0.25-to-1 — and with momentum just at the entry floor, the setup does not support new capital at current prices. Engine gate (failed) | The stock retraces to below $70, restoring more than 10% of upside to the analyst consensus target and rebuilding an attractive risk/reward ratio for entry. | →Stable |
| CounterMetal fabrication companies near recent highs can continue advancing if end-market demand strengthens; price targets often lag fundamentals, and strong earnings could trigger upward revisions that reopen the upside gap without requiring a price pullback. | ||
At a forward price-to-earnings ratio of 11.1x and a PEG of 0.04, the market prices in almost no earnings growth for a business that has produced 22% year-over-year earnings expansion — a setup that screens as deeply discounted relative to peers on a growth-adjusted basis.
→StableValuation breakdown
- Expectation
- Earnings per share grows more than 15% year over year for two consecutive quarters, confirming that the growth rate justifies a multiple re-rating toward peer levels.
CounterMetal fabrication earnings can compress rapidly in a demand slowdown; the low multiple may reflect rational recognition of cyclicality rather than a mispricing, and growth could reverse quickly if infrastructure spending softens.
The company has produced an alternating pattern — a miss at the oldest quarter, two consecutive beats, then a miss in the most recent quarter at -10.5% versus consensus — signaling that operational delivery remains uneven and that the beat track record is not durable.
→StableEarnings
- Expectation
- EPS surprise exceeds 5% for three of the next four quarters, establishing a credible and consistent beat cadence.
CounterIn commodity-linked businesses, earnings variability of this magnitude can reflect external pricing cycles rather than management execution; a metals pricing recovery could deliver beats independent of any internal improvement.
Free cash flow represents only 29% of net income — a red-flag level of conversion that raises questions about whether reported profits translate into genuine cash available for shareholders, and the business lacks a recognized competitive moat to protect future earnings power.
→StableQuality breakdown
- Expectation
- Free cash flow as a percentage of net income rises above 60% for two consecutive quarters, demonstrating that earnings are converting to cash at a sustainable rate.
CounterFabrication businesses with active growth investments regularly show compressed near-term free cash flow; once capital projects complete and depreciation cycles catch up, the conversion ratio can normalize without reflecting any underlying structural problem.
With only 1.7% of headroom to the near-term price ceiling, downside of 6.8% outpacing upside produces a risk/reward ratio of 0.25-to-1 — and with momentum just at the entry floor, the setup does not support new capital at current prices.
→StableEngine gate (failed)
- Expectation
- The stock retraces to below $70, restoring more than 10% of upside to the analyst consensus target and rebuilding an attractive risk/reward ratio for entry.
CounterMetal fabrication companies near recent highs can continue advancing if end-market demand strengthens; price targets often lag fundamentals, and strong earnings could trigger upward revisions that reopen the upside gap without requiring a price pullback.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Commercial Metals trades at an attractive forward multiple of 11.1x with 22% year-over-year earnings growth, but a mixed earnings track record with the most recent quarter a miss, a deeply unfavorable risk/reward geometry with only 1.7% of room to the near-term ceiling, and earnings results due in nine days create a cautious hold posture.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.6 |
| ROA | 4.2 |
| Gross margin | 0.0 |
| Op margin | 3.8 |
| Net margin | 3.4 |
| Current ratio | 8.0 |
| FCF quality | 1.8 |
| Moat | 6.1 |
| Piotroski F | 8.9 |
- ▸Earnings quality RED FLAG: 23% FCF/NI
- ▸Strong Piotroski F-Score: 8/9
Growth
9.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 8.2 |
| EPS growth | 10.0 |
- ▸Strong growth: 23% YoY
Momentum
1.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.0 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 2.2 |
| Volume | 3.1 |
- ▸Capitulation risk (RSI 18, below 200MA)
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA but MA still rising (+3.8%/30d) — pullback in uptrend, not confirmed weakness
Sentiment
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 3.0 |
| Analyst rating | 7.0 |
| Price target | 8.7 |
- ▸LLM news sentiment: -0.40 (n=1)
- ▸Analyst upside: 32%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
5.3/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.4 |
| quality rank | 4.7 |
| growth rank | 8.0 |
- ▸Attractive P/E vs peers
Technical
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 9.8 |
| support resistance | 9.6 |
| 52w position | 4.6 |
| gap | 5.0 |
Risk (lower is worse)
3.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.9 |
| days to cover | 5.5 |
| volatility | 0.8 |
| put call | 0.0 |
| implied vol | 3.0 |
| beta | 4.9 |
| debt equity | 6.2 |
- ▸Elevated put/call: 16.38
- ▸High IV: 62%
Catalyst
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 4.4 |
| dividend safety | 5.2 |
| news activity | 5.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 130.0%
How the verdict was assembled
Engine trigger
Mixed signals. Hold existing position.
Engine technical detail
verdict_path:
L4:PATH_F_HOLD_DEFAULTPassed (5)
- ASYMMETRY:1.6>=1.5
- INSIDER:OK
- EARNINGS_PROXIMITY:103d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- MOMENTUM:1.9<4.5
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
1.60
Upside
+14.9%
Downside
9.3%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — Beta 1.53>1.3
Investment implication
The default F-path HOLD fired without any positive-conviction gate triggering — no momentum acceleration, no quality+value crossover, no setup recognition. Highest-clear gate: ASYMMETRY:1.6>=1.5. Top dim: Growth at 9.1; weakest: Momentum at 1.9. The engine's read is one of pattern absence — no directional conviction in either direction at current asymmetry.
The strongest dimensions are Growth at 9.1, Value at 8.5, and Technical at 7.2; the weakest are Momentum at 1.9, Risk (lower is worse) at 3.9, and Quality at 4.5. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 1.60 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 With Growth
Trip ifEarnings per share growth falls below 5% year over year for 2 consecutive quarters.
- P2Inconsistent Earnings Execution
Trip ifEPS surprise exceeds 5% for 3 of the next 4 quarters.
- P3Weak Free Cash Flow Conversion
Trip ifFree cash flow as a percentage of net income rises above 60% for 2 consecutive quarters.
- P4Unfavorable Risk Geometry At Ceiling
Trip ifStock price retraces below $70, restoring more than 10% upside to the current consensus price target.