Value
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.3 |
| P/S | 8.5 |
| EV/EBITDA | 2.5 |
| Fwd P/E | 6.3 |
| PEG | 4.8 |
| Analyst target | 4.0 |
- ▸Forward P/E: 20.3x
- ▸PEG: 1.69
DCI · Why this verdict
Why Donaldson Company (DCI) 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 score5.7/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
With a 28% return on equity and a perfect Piotroski F-Score of 9 out of 9, the business generates strong returns on capital and passes every major balance sheet health test, reflecting a high-quality industrial franchise. Quality | Return on equity should remain above 20% and the Piotroski score at 8 or higher over the next four quarters, validating the quality designation. | →Stable |
| CounterThe Piotroski score captures point-in-time balance sheet strength, not forward earnings risk; with free cash flow running below net income, reported earnings may be overstating near-term cash generation. | ||
Free cash flow is running at 69% of net income, a meaningful gap flagged as a quality concern, suggesting reported earnings may be outpacing actual cash generation at this stage. Quality | The concern resolves if free cash flow as a percentage of net income rises above 90% for two consecutive quarters, signaling better earnings-to-cash conversion. | →Stable |
| CounterA gap between free cash flow and net income can reflect temporary working capital timing; if the gap closes in the next one to two quarters the quality score would normalize and the caution would prove transient. | ||
With only about 0.2% headroom remaining to the take-profit level, the stock has effectively reached the analyst price target, eliminating near-term upside and making new entry unattractive at current prices. Price targets | The setup becomes constructive if the stock pulls back toward the entry target of approximately $80.42, restoring meaningful upside to the $86.63 take-profit level. | →Stable |
| CounterAnalyst targets at this stage may simply lag fundamental progress; if earnings continue to beat expectations, target upgrades could restore upside rapidly and make the current price appear conservative in retrospect. | ||
The earnings record shows three beats in the last four quarters, with the most recent quarter a beat, but a miss one quarter prior; the consistency is imperfect and creates uncertainty about whether the pattern will persist. Earnings | Two consecutive quarters of positive EPS surprises from the current point would restore confidence in the beat pattern. | →Stable |
| CounterThree of four quarters beat estimates and the most recent quarter was a beat; the single miss may be a one-quarter anomaly rather than a trend, particularly if revenue and operating conditions remain stable. | ||
A put/call ratio of 1.82 and implied volatility at 70% indicate options market participants are positioning defensively, signaling heightened near-term uncertainty around the stock. Risk | The concern eases if the put/call ratio falls below 1.0 over the next two months, signaling a shift toward a more constructive near-term posture. | →Stable |
| CounterElevated put/call ratios in a slow-moving industrial stock often reflect institutional hedging of long equity positions rather than directional bearishness, and may not be predictive of near-term downside. | ||
With a 28% return on equity and a perfect Piotroski F-Score of 9 out of 9, the business generates strong returns on capital and passes every major balance sheet health test, reflecting a high-quality industrial franchise.
→StableQuality
- Expectation
- Return on equity should remain above 20% and the Piotroski score at 8 or higher over the next four quarters, validating the quality designation.
CounterThe Piotroski score captures point-in-time balance sheet strength, not forward earnings risk; with free cash flow running below net income, reported earnings may be overstating near-term cash generation.
Free cash flow is running at 69% of net income, a meaningful gap flagged as a quality concern, suggesting reported earnings may be outpacing actual cash generation at this stage.
→StableQuality
- Expectation
- The concern resolves if free cash flow as a percentage of net income rises above 90% for two consecutive quarters, signaling better earnings-to-cash conversion.
CounterA gap between free cash flow and net income can reflect temporary working capital timing; if the gap closes in the next one to two quarters the quality score would normalize and the caution would prove transient.
With only about 0.2% headroom remaining to the take-profit level, the stock has effectively reached the analyst price target, eliminating near-term upside and making new entry unattractive at current prices.
→StablePrice targets
- Expectation
- The setup becomes constructive if the stock pulls back toward the entry target of approximately $80.42, restoring meaningful upside to the $86.63 take-profit level.
CounterAnalyst targets at this stage may simply lag fundamental progress; if earnings continue to beat expectations, target upgrades could restore upside rapidly and make the current price appear conservative in retrospect.
The earnings record shows three beats in the last four quarters, with the most recent quarter a beat, but a miss one quarter prior; the consistency is imperfect and creates uncertainty about whether the pattern will persist.
→StableEarnings
- Expectation
- Two consecutive quarters of positive EPS surprises from the current point would restore confidence in the beat pattern.
CounterThree of four quarters beat estimates and the most recent quarter was a beat; the single miss may be a one-quarter anomaly rather than a trend, particularly if revenue and operating conditions remain stable.
A put/call ratio of 1.82 and implied volatility at 70% indicate options market participants are positioning defensively, signaling heightened near-term uncertainty around the stock.
→StableRisk
- Expectation
- The concern eases if the put/call ratio falls below 1.0 over the next two months, signaling a shift toward a more constructive near-term posture.
CounterElevated put/call ratios in a slow-moving industrial stock often reflect institutional hedging of long equity positions rather than directional bearishness, and may not be predictive of near-term downside.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Donaldson carries a high-quality industrial franchise with a 28% return on equity and a perfect balance sheet health score, but the stock has effectively reached its analyst price target with virtually no remaining upside, making the risk/reward unattractive for new positions at current levels.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 9.3 |
| ROA | 8.0 |
| Gross margin | 2.9 |
| Op margin | 6.5 |
| Net margin | 5.8 |
| Current ratio | 8.1 |
| FCF quality | 5.3 |
| Moat | 6.1 |
| Piotroski F | 10.0 |
- ▸Excellent ROE: 28%
- ▸Earnings quality warning: 69% FCF/NI
- ▸Strong Piotroski F-Score: 9/9
Growth
7.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.9 |
| EPS growth | 10.0 |
Momentum
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 5.6 |
| MA position | 9.0 |
| Volume | 1.5 |
- ▸Above 200-day MA
Sentiment
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 6.3 |
| erm sentiment | 5.0 |
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Insider selling (low materiality) — $1,765,184 (0.017% of mkt cap)
Peer rank
4.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 7.2 |
| quality rank | 7.5 |
| growth rank | 3.5 |
- ▸Superior ROE vs peers
Technical
2.9/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.6 |
| support resistance | 1.3 |
| 52w position | 5.8 |
Risk (lower is worse)
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.9 |
| days to cover | 5.5 |
| volatility | 7.0 |
| put call | 4.8 |
| implied vol | 3.7 |
| beta | 7.4 |
| debt equity | 8.6 |
Catalyst
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 2.2 |
| dividend safety | 5.2 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 137.0%
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more.
Engine technical detail
verdict_path:
L4:PATH_F_HOLDPassed (7)
- MOMENTUM:6.2>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:54d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.7=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.72
Upside
-5.5%
Downside
7.6%
Sizing output
AVOID
SetupMomentum Cont — Trend continuation, RSI 65, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: MOMENTUM:6.2>=5.5. Top dim: Growth at 7.0; weakest: Technical at 2.9. No conviction either direction.
The strongest dimensions are Growth at 7.0, Quality at 6.9, and Risk (lower is worse) at 6.4; the weakest are Technical at 2.9, Peer rank at 4.5, and Catalyst at 4.8. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.72 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 Industrial Franchise
Trip ifReturn on equity falls below 20% for 2 consecutive quarters from the current 28%.
- P2Fcf Below Net Income
Trip ifFree cash flow as a percentage of net income rises above 90% for 2 consecutive quarters, resolving the conversion gap.
- P3Price At Analyst Target
Trip ifStock price falls to the entry target of $80.42 or below, restoring meaningful upside to the $86.63 take-profit level.
- P4Uneven Earnings Consistency
Trip ifEPS surprise rises above 0% for 2 consecutive quarters following the recent miss.
- P5Elevated Options Market Caution
Trip ifPut/call ratio falls below 1.0 for 4 consecutive weeks.