Value
3.9/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 1.8 |
| P/S | 7.2 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 2.6 |
| PEG | 6.8 |
| Analyst target | 4.0 |
- ▸Forward P/E: 44.5x
- ▸PEG: 1.06
ESLT · Why this verdict
Why Elbit Systems (ESLT) 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 score5.2/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company has exceeded earnings expectations in each of the past four quarters, with positive surprises of 16%, 13%, 23%, and 26% respectively—a consistently wide margin of outperformance suggesting genuine operating leverage that continues to surprise analysts to the upside. Earnings | The average EPS surprise should remain above 10% for each of the next two quarterly reports, confirming that the consistent outperformance reflects durable operating execution rather than a low consensus bar. | →Stable |
| CounterFour quarters of wide beats tend to reset analyst estimates sharply higher; if the bar rises proportionally, the next beat will need to be materially larger in absolute terms to maintain the same optically strong surprise percentage, making the streak progressively harder to sustain. | ||
A forward earnings multiple of 45.1x, combined with roughly 10% of headroom to the near-term price target and a risk/reward ratio just shy of the 1.5-to-1 asymmetry bar, means the setup is marginally favorable but insufficient for full-size positioning—the multiple leaves little cushion if the growth trajectory softens even modestly. Valuation breakdown | The multiple should compress naturally toward 30x as earnings grow into the price over the next four quarters, or the stock should pull back toward the entry target level before the setup becomes asymmetrically attractive. | →Stable |
| CounterDefense businesses with a consistent and wide beat track record can sustain elevated multiples for extended periods when the defense-spending environment is favorable; a premium multiple with positive earnings momentum can persist longer than valuation discipline would predict. | ||
Free cash flow is only 16% of reported net income—a significant earnings quality red flag—raising the question of whether the strong earnings growth translates into real cash returns or primarily reflects non-cash accounting gains that cannot be distributed or reinvested. Quality breakdown | Free cash flow as a share of net income should recover toward 50% over the next four quarters to validate that the earnings growth is generating genuine cash economics rather than accrual-only expansion. | →Stable |
| CounterDefense contractors commonly require heavy upfront investment in program development and inventory that temporarily depresses free cash flow relative to GAAP earnings; if the current phase reflects contract ramp spending, the conversion ratio may normalize as programs reach production maturity. | ||
Earnings growth scores at the top of the measurement range, supported by a beat pattern where actual EPS has climbed from $3.23 to $3.87 per quarter over the trailing year—a trajectory that, if sustained, provides a fundamental basis for the premium valuation and further price appreciation. Growth | Reported EPS should grow at least 10% year-over-year for each of the next two quarters to confirm that the growth momentum is durable rather than a function of an unusually favorable prior-year comparison. | →Stable |
| CounterFalling on-balance volume despite improving MACD suggests institutional holders may be distributing into the earnings strength, which can precede a deceleration in the reported growth rate; defense contract deliveries can also peak abruptly when large programs shift from ramp to steady-state. | ||
The company has exceeded earnings expectations in each of the past four quarters, with positive surprises of 16%, 13%, 23%, and 26% respectively—a consistently wide margin of outperformance suggesting genuine operating leverage that continues to surprise analysts to the upside.
→StableEarnings
- Expectation
- The average EPS surprise should remain above 10% for each of the next two quarterly reports, confirming that the consistent outperformance reflects durable operating execution rather than a low consensus bar.
CounterFour quarters of wide beats tend to reset analyst estimates sharply higher; if the bar rises proportionally, the next beat will need to be materially larger in absolute terms to maintain the same optically strong surprise percentage, making the streak progressively harder to sustain.
A forward earnings multiple of 45.1x, combined with roughly 10% of headroom to the near-term price target and a risk/reward ratio just shy of the 1.5-to-1 asymmetry bar, means the setup is marginally favorable but insufficient for full-size positioning—the multiple leaves little cushion if the growth trajectory softens even modestly.
→StableValuation breakdown
- Expectation
- The multiple should compress naturally toward 30x as earnings grow into the price over the next four quarters, or the stock should pull back toward the entry target level before the setup becomes asymmetrically attractive.
CounterDefense businesses with a consistent and wide beat track record can sustain elevated multiples for extended periods when the defense-spending environment is favorable; a premium multiple with positive earnings momentum can persist longer than valuation discipline would predict.
Free cash flow is only 16% of reported net income—a significant earnings quality red flag—raising the question of whether the strong earnings growth translates into real cash returns or primarily reflects non-cash accounting gains that cannot be distributed or reinvested.
→StableQuality breakdown
- Expectation
- Free cash flow as a share of net income should recover toward 50% over the next four quarters to validate that the earnings growth is generating genuine cash economics rather than accrual-only expansion.
CounterDefense contractors commonly require heavy upfront investment in program development and inventory that temporarily depresses free cash flow relative to GAAP earnings; if the current phase reflects contract ramp spending, the conversion ratio may normalize as programs reach production maturity.
Earnings growth scores at the top of the measurement range, supported by a beat pattern where actual EPS has climbed from $3.23 to $3.87 per quarter over the trailing year—a trajectory that, if sustained, provides a fundamental basis for the premium valuation and further price appreciation.
→StableGrowth
- Expectation
- Reported EPS should grow at least 10% year-over-year for each of the next two quarters to confirm that the growth momentum is durable rather than a function of an unusually favorable prior-year comparison.
CounterFalling on-balance volume despite improving MACD suggests institutional holders may be distributing into the earnings strength, which can precede a deceleration in the reported growth rate; defense contract deliveries can also peak abruptly when large programs shift from ramp to steady-state.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Elbit Systems has demonstrated consistent and wide earnings outperformance across four consecutive quarters, averaging nearly 20% above consensus, with strong earnings growth—but the stock trades at a forward earnings multiple of 45.1x and converts only 16% of reported net income into free cash flow, two constraints that leave the current valuation highly dependent on sustained flawless execution.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
4.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 5.2 |
| ROA | 2.5 |
| Gross margin | 0.9 |
| Op margin | 3.7 |
| Net margin | 3.6 |
| Current ratio | 5.2 |
| FCF quality | 1.3 |
| Moat | 6.9 |
| Piotroski F | 7.8 |
- ▸Earnings quality RED FLAG: 16% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
8.2/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 6.4 |
| EPS growth | 10.0 |
Momentum
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 8.3 |
| MACD | 0.0 |
| OBV | 10.0 |
| MA position | 7.0 |
| Volume | 4.9 |
- ▸Uptrend pullback (RSI 32) - buy opportunity
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 6.2 |
| erm sentiment | 5.0 |
Insider
3.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 3.0 |
| insider conviction | 2.0 |
| holder change | 5.0 |
- ▸Notable insider selling — $61,883,726 (0.164% of mkt cap)
Peer rank
3.8/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.7 |
| quality rank | 7.0 |
| growth rank | 4.6 |
Technical
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 4.7 |
| support resistance | 5.5 |
| 52w position | 5.8 |
| gap | 4.0 |
Risk (lower is worse)
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.6 |
| days to cover | 8.9 |
| volatility | 3.1 |
| put call | 6.5 |
| implied vol | 4.3 |
| debt equity | 9.2 |
Catalyst
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 3.5 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 5.2 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 50.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:6.0>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:45d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.5=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.51
Upside
-5.9%
Downside
11.6%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.2 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Growth at 8.2) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.5=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.51 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 8.2, Risk (lower is worse) at 6.9, and Catalyst at 6.7; the weakest are Insider at 3.3, Peer rank at 3.8, and Value at 3.9. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.51 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Exceptional Earnings Beat Streak
Trip ifEPS surprise falls below 0% for 2 consecutive quarters.
- P2Premium Valuation Thin Asymmetry
Trip ifForward P/E compresses below 30x for 2 consecutive quarters.
- P3Poor Free Cash Conversion
Trip ifFree cash flow as a percentage of net income rises above 50% for 2 consecutive quarters.
- P4Strong Earnings Growth Momentum
Trip ifReported EPS grows less than 10% year-over-year for 2 consecutive quarters.