Value
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.1 |
| P/S | 8.9 |
| EV/EBITDA | 3.5 |
| Fwd P/E | 6.2 |
| PEG | 4.6 |
| Analyst target | 4.0 |
- ▸Forward P/E: 20.7x
- ▸PEG: 1.91
FELE · Why this verdict
Why Franklin Electric Co. (FELE) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
Show full disclosure ▾Hide full disclosure ▴
About TrendMatrix. TrendMatrix is a publisher of general securities research and market commentary. We publish on a regular schedule. All content is the same for every subscriber in a tier — we do not provide personalized investment advice and we do not take into account any individual subscriber's financial situation, investment objectives, risk tolerance, tax situation, or holdings.
Not investment advice. TrendMatrix is not a registered investment adviser. Our content is for informational and educational purposes only. Consult your own licensed investment adviser, broker, or tax professional before making any investment decision.
Conflicts and positions. The TrendMatrix editorial team frequently holds personal long-term positions in securities discussed. We disclose positions held at the time of publication on each piece. We maintain a trading-window policy: we do not initiate or close positions in the same direction as a TrendMatrix publication within 24 hours before or 72 hours after publication.
No paid promotion. TrendMatrix does not accept payment from any issuer, broker, or third party in exchange for coverage of any security. Our sole compensation is subscription revenue.
No fiduciary duty. No fiduciary, advisory, or agency relationship is created between you and TrendMatrix by reading our content or subscribing to our service.
Performance. Past performance is not indicative of future results. Performance figures reflect the published model only and do not reflect any individual subscriber's actual results.
VerdictSELL
Overall score5.1/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The business carries a near-perfect financial health score — with a current ratio of 9.0 and low leverage — reflecting an exceptionally well-capitalized industrial operator with minimal near-term liquidity risk and substantial capacity to weather a demand downturn. Quality | Free cash flow remains above 50% of net income for the next 4 reported quarters, demonstrating that the strong balance sheet is backed by genuine cash generation rather than accounting earnings alone. | →Stable |
| CounterA current ratio of 9.0 can indicate inefficient working capital management, with excess liquidity sitting idle rather than being deployed productively; if capital allocation discipline does not improve, returns on equity and invested capital may remain subdued. | ||
A single segment — Water Systems — accounts for roughly 60% of total revenue, meaning a substantial share of financial results depends on one product area; any structural demand shift, pricing pressure, or disruption in that segment would have an outsized impact on the overall business. Bear case | Water Systems revenue contribution falls below 55% of total revenue for 2 consecutive annual periods, indicating diversification is progressing, or Water Systems revenue grows above 8% year-over-year, demonstrating that the concentrated exposure is at least generating strong returns. | →Stable |
| CounterA 60% segment concentration in water-related infrastructure — a market with durable secular demand from replacement cycles and global access needs — may represent a deliberate focus strategy rather than a structural vulnerability, particularly if that segment generates above-average margins. | ||
The company has beaten estimates in three of the last four quarters, including an 8% beat in the most recent quarter; the lone miss in the second-most-recent quarter was the only deviation, and prior to that, two consecutive beats were recorded. Earnings | EPS surprise remains above 0% in each of the next 2 consecutive reported quarters, demonstrating the recent miss was a one-quarter anomaly rather than the start of a deteriorating trend. | →Stable |
| CounterThe average positive surprise across all four quarters is modest at roughly 2%, and a miss directly preceding the most recent beat suggests the beat cadence is fragile; a modest pricing or volume headwind could produce a second miss and signal that the outperformance pattern has ended. | ||
The stock is trading above its analyst take-profit target, leaving no remaining headroom to the upside; the reward-to-risk ratio is unfavorable, and the setup does not clear the minimum threshold for adding new exposure at the current price. Price targets | The stock pulls back at least 8% from $103.50, falling below $95.22 and creating a fresh entry zone where upside to a new take-profit target exceeds the downside by at least 1.5-to-1. | →Stable |
| CounterIf the next earnings report continues the beat streak, analyst price targets could be revised meaningfully upward, retroactively justifying the current price level and opening a new leg of potential upside. | ||
The business carries a near-perfect financial health score — with a current ratio of 9.0 and low leverage — reflecting an exceptionally well-capitalized industrial operator with minimal near-term liquidity risk and substantial capacity to weather a demand downturn.
→StableQuality
- Expectation
- Free cash flow remains above 50% of net income for the next 4 reported quarters, demonstrating that the strong balance sheet is backed by genuine cash generation rather than accounting earnings alone.
CounterA current ratio of 9.0 can indicate inefficient working capital management, with excess liquidity sitting idle rather than being deployed productively; if capital allocation discipline does not improve, returns on equity and invested capital may remain subdued.
A single segment — Water Systems — accounts for roughly 60% of total revenue, meaning a substantial share of financial results depends on one product area; any structural demand shift, pricing pressure, or disruption in that segment would have an outsized impact on the overall business.
→StableBear case
- Expectation
- Water Systems revenue contribution falls below 55% of total revenue for 2 consecutive annual periods, indicating diversification is progressing, or Water Systems revenue grows above 8% year-over-year, demonstrating that the concentrated exposure is at least generating strong returns.
CounterA 60% segment concentration in water-related infrastructure — a market with durable secular demand from replacement cycles and global access needs — may represent a deliberate focus strategy rather than a structural vulnerability, particularly if that segment generates above-average margins.
The company has beaten estimates in three of the last four quarters, including an 8% beat in the most recent quarter; the lone miss in the second-most-recent quarter was the only deviation, and prior to that, two consecutive beats were recorded.
→StableEarnings
- Expectation
- EPS surprise remains above 0% in each of the next 2 consecutive reported quarters, demonstrating the recent miss was a one-quarter anomaly rather than the start of a deteriorating trend.
CounterThe average positive surprise across all four quarters is modest at roughly 2%, and a miss directly preceding the most recent beat suggests the beat cadence is fragile; a modest pricing or volume headwind could produce a second miss and signal that the outperformance pattern has ended.
The stock is trading above its analyst take-profit target, leaving no remaining headroom to the upside; the reward-to-risk ratio is unfavorable, and the setup does not clear the minimum threshold for adding new exposure at the current price.
→StablePrice targets
- Expectation
- The stock pulls back at least 8% from $103.50, falling below $95.22 and creating a fresh entry zone where upside to a new take-profit target exceeds the downside by at least 1.5-to-1.
CounterIf the next earnings report continues the beat streak, analyst price targets could be revised meaningfully upward, retroactively justifying the current price level and opening a new leg of potential upside.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Franklin Electric carries an exceptionally strong balance sheet — maximum financial health scores, a current ratio of 9.0, and low leverage — and has beaten estimates in three of the last four quarters; however, the Water Systems segment accounts for roughly 60% of revenue concentrating both revenue and supplier risk in a single area, the stock has risen above its analyst take-profit target leaving no upside buffer, and free cash flow is running at only about 59% of net income, below what a high-quality earnings profile would typically imply.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.8 |
| ROA | 6.0 |
| Gross margin | 3.0 |
| Op margin | 4.1 |
| Net margin | 3.5 |
| Current ratio | 9.0 |
| FCF quality | 4.6 |
| Moat | 6.5 |
| Piotroski F | 10.0 |
- ▸Earnings quality warning: 59% FCF/NI
- ▸Strong Piotroski F-Score: 9/9
Growth
5.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.0 |
| EPS growth | 5.0 |
Momentum
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 7.6 |
| OBV | 1.0 |
| MA position | 9.0 |
| Volume | 2.7 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 6.1 |
| erm sentiment | 5.0 |
Insider
3.9/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.1 |
- ▸Modest insider selling — $2,005,023 (0.043% of mkt cap)
Peer rank
4.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 7.0 |
| quality rank | 4.0 |
| growth rank | 5.2 |
Technical
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 3.7 |
| support resistance | 3.5 |
| 52w position | 8.9 |
Risk (lower is worse)
7.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.0 |
| days to cover | 7.9 |
| volatility | 6.7 |
| put call | 8.2 |
| implied vol | 5.5 |
| beta | 6.9 |
| debt equity | 9.1 |
- ▸Concentration risks: 2 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 3.5 |
| dividend safety | 7.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 106.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:5.2>=4.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:24d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-1.1=NEGATIVE
Warning (1)
- MOMENTUM:5.2<5.5 (soft — BUY_NOW allowed but watch)
Reward-to-Risk
-1.14
Upside
-8.4%
Downside
7.4%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 59, MACD bullish
EdgeCatalyst-Driven — Earnings in 24d with 3/4 beat streak
SuitabilityAggressive — MCap $4.6B<$5B
Investment implication
The F-path SELL output reflects an overall score of 5.1 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 7.6) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-1.1=NEGATIVE) reinforce the read. Current asymmetry R:R is -1.14 — supplementary context, not the trigger for this path.
The strongest dimensions are Risk (lower is worse) at 7.6, Quality at 5.6, and Sentiment at 5.4; the weakest are Insider at 3.9, Peer rank at 4.0, and Growth at 5.0. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -1.14 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Exceptional Balance Sheet Financial Health
Trip ifFree cash flow falls below 30% of net income for 2 consecutive reported quarters, signaling a material deterioration in earnings quality from the current 59% level.
- P2Water Systems Segment Revenue Concentration
Trip ifWater Systems segment revenue contribution falls below 55% of total revenue for 2 consecutive annual reporting periods, demonstrating meaningful diversification.
- P3Earnings Mostly Positive Beat Record
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, indicating the positive earnings execution pattern has broken down.
- P4Price Above Target No Upside Buffer
Trip ifStock price pulls back more than 8% from $103.50, falling below $95.22 and restoring at least 8% upside to any analyst target above $103.