Value
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 2.7 |
| P/S | 5.2 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 4.0 |
| PEG | 9.1 |
| Analyst target | 7.5 |
- ▸Forward P/E: 29.8x
- ▸PEG: 0.64
CRS · Why this verdict
Why Carpenter Technology Corporatio (CRS) 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 score5.9/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
A high-quality industrial compounder with four consecutive earnings beats and strong financial health metrics that has already exceeded its price target; the elevated forward earnings multiple of 44.5 times, overbought technical readings, and below-average free cash flow conversion suggest the near-term setup favors patience over new capital deployment.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The business has beaten EPS estimates in each of the last four quarters with an average positive surprise of approximately 7%, while maintaining operating margins of approximately 16% and a Piotroski financial health score of 8 out of 9 — the hallmarks of a well-managed industrial franchise with consistent execution. Earnings | The beat streak extends to at least 6 consecutive quarters and operating margins hold above 14% over the next year. | ↑Improving |
| CounterSteady beats with moderate surprise magnitude can reflect conservative guidance discipline as much as operational strength; if industrial end markets soften, the beat pattern may break without a corresponding deterioration in the underlying franchise quality. | ||
At a forward price-to-earnings multiple of 44.5 times — a level that screens as expensive relative to the sector — with the stock already trading above its identified price target, the current level appears to have fully priced the near-to-medium term earnings outlook with little margin of safety remaining. Valuation breakdown | If the multiple is justified by growth, forward earnings estimates would need to rise enough to compress the forward P/E below 25 times over the next four quarters. | ↑Improving |
| CounterA PEG ratio of 0.94 suggests that once growth is incorporated, the multiple sits near fair value; continued earnings upgrades could make the apparent richness look temporary in hindsight. | ||
The RSI has reached 92, deep in overbought territory, while on-balance volume has been declining — suggesting that recent price appreciation has been driven by thinning participation, a setup that historically precedes consolidation or a short-term correction. Momentum breakdown | RSI normalizes below 70 over 4-6 weeks as price consolidates, and on-balance volume turns upward, creating a healthier technical foundation for the quality story to continue. | ↓Deteriorating |
| CounterOverbought RSI readings can persist in strongly trending markets, particularly when short interest is modest; an overbought reading alone is not sufficient reason to exit a high-quality business with consistent earnings delivery. | ||
Free cash flow is converting at approximately 63% of net income — below the level typically associated with high-confidence earnings quality — suggesting reported earnings may be outpacing the cash actually available for shareholders or reinvestment. Quality breakdown | FCF conversion rises above 90% of net income for 2 consecutive quarters, confirming that the earnings quality concern has resolved. | →Stable |
| CounterA 63% FCF-to-net-income conversion is not unusual for capital-intensive industrial businesses; if the shortfall reflects deliberate capital investment rather than a structural earnings-quality issue, it may improve naturally as those programs wind down. | ||
The business has beaten EPS estimates in each of the last four quarters with an average positive surprise of approximately 7%, while maintaining operating margins of approximately 16% and a Piotroski financial health score of 8 out of 9 — the hallmarks of a well-managed industrial franchise with consistent execution.
↑ImprovingEarnings
- Expectation
- The beat streak extends to at least 6 consecutive quarters and operating margins hold above 14% over the next year.
CounterSteady beats with moderate surprise magnitude can reflect conservative guidance discipline as much as operational strength; if industrial end markets soften, the beat pattern may break without a corresponding deterioration in the underlying franchise quality.
At a forward price-to-earnings multiple of 44.5 times — a level that screens as expensive relative to the sector — with the stock already trading above its identified price target, the current level appears to have fully priced the near-to-medium term earnings outlook with little margin of safety remaining.
↑ImprovingValuation breakdown
- Expectation
- If the multiple is justified by growth, forward earnings estimates would need to rise enough to compress the forward P/E below 25 times over the next four quarters.
CounterA PEG ratio of 0.94 suggests that once growth is incorporated, the multiple sits near fair value; continued earnings upgrades could make the apparent richness look temporary in hindsight.
The RSI has reached 92, deep in overbought territory, while on-balance volume has been declining — suggesting that recent price appreciation has been driven by thinning participation, a setup that historically precedes consolidation or a short-term correction.
↓DeterioratingMomentum breakdown
- Expectation
- RSI normalizes below 70 over 4-6 weeks as price consolidates, and on-balance volume turns upward, creating a healthier technical foundation for the quality story to continue.
CounterOverbought RSI readings can persist in strongly trending markets, particularly when short interest is modest; an overbought reading alone is not sufficient reason to exit a high-quality business with consistent earnings delivery.
Free cash flow is converting at approximately 63% of net income — below the level typically associated with high-confidence earnings quality — suggesting reported earnings may be outpacing the cash actually available for shareholders or reinvestment.
→StableQuality breakdown
- Expectation
- FCF conversion rises above 90% of net income for 2 consecutive quarters, confirming that the earnings quality concern has resolved.
CounterA 63% FCF-to-net-income conversion is not unusual for capital-intensive industrial businesses; if the shortfall reflects deliberate capital investment rather than a structural earnings-quality issue, it may improve naturally as those programs wind down.
Per-dimension breakdown
Quality
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 8.6 |
| ROA | 7.9 |
| Gross margin | 2.1 |
| Op margin | 9.6 |
| Net margin | 8.5 |
| Current ratio | 9.2 |
| FCF quality | 3.6 |
| Moat | 6.8 |
| Piotroski F | 10.0 |
- ▸Excellent ROE: 26%
- ▸Strong margins: 17%
- ▸Earnings quality RED FLAG: 45% FCF/NI
- ▸Strong Piotroski F-Score: 9/9
Growth
7.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.6 |
| EPS growth | 10.0 |
Momentum
3.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 8.6 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 4.0 |
| Volume | 6.1 |
- ▸Oversold in uptrend (RSI 22)
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 9.0 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 36%
Insider
3.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 3.0 |
| insider conviction | 2.0 |
| holder change | 5.0 |
- ▸Notable insider selling — $53,091,755 (0.226% of mkt cap)
Peer rank
4.6/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 1.3 |
| quality rank | 8.1 |
| growth rank | 3.0 |
- ▸Superior ROE vs peers
Technical
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 8.7 |
| support resistance | 9.7 |
| 52w position | 4.7 |
Risk (lower is worse)
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.4 |
| days to cover | 8.7 |
| volatility | 3.1 |
| put call | 5.9 |
| implied vol | 5.4 |
| beta | 5.9 |
| debt equity | 8.7 |
Catalyst
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 5.9 |
| dividend safety | 6.8 |
- ▸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)
- ASYMMETRY:2.4>=1.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:50d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- MOMENTUM:3.9<4.5
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
2.42
Upside
+18.1%
Downside
7.5%
Sizing output
AVOID
SetupOversold Bounce — Oversold RSI 22, near Bollinger lower, volume surge
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.4 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Growth at 7.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:3.9<4.5) reinforce the read. Current asymmetry R:R is 2.42 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 7.8, Technical at 7.7, and Quality at 7.4; the weakest are Insider at 3.3, Momentum at 3.9, and Peer rank at 4.6. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 2.42 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1High Quality Earnings Compounder
Trip ifEPS surprise falls below 0% for 2 consecutive quarters.
- P2Stretched Valuation Above Target
Trip ifForward P/E multiple compresses below 20x from the current 44.5x, driven by earnings estimate upgrades outpacing price appreciation.
- P3Overbought Technicals Falling Volume
Trip ifRSI falls below 55 and on-balance volume turns positive (rising) for 3 consecutive weeks.
- P4Fcf Conversion Below Earnings Quality Bar
Trip ifFCF conversion rises above 90% of net income for 2 consecutive quarters.