Value
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.4 |
| P/S | 8.1 |
| EV/EBITDA | 5.9 |
| Fwd P/E | 9.6 |
| PEG | 5.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 8.1x
- ▸PEG: 1.53
GEN · Why this verdict
Why Gen Digital (GEN) 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 score6.7/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
With a return on equity of 40%, net margins of 19%, free cash flow running at 146% of net income, a Rule of 40 score of 55, and a wide economic moat, this is a software business that consistently converts growth into durable cash returns. Quality breakdown | Free cash flow stays above 100% of net income and operating margins hold above 15% over the next four quarters, confirming that the quality of earnings is not deteriorating. | →Stable |
| CounterLeverage of 3.2x debt-to-equity amplifies the quality picture; if cash flows soften, debt-service pressure could erode the margin profile and compress the multiple well below current levels. | ||
Revenue growing at 27% year over year trades at a forward earnings multiple of 7.4x and a price-to-growth ratio of 1.40, making the growth profile unusually inexpensive relative to the pace of earnings expansion. Valuation breakdown | The discount between the growth rate and the earnings multiple narrows as the stock re-rates toward a forward multiple of 12x or above within 12 months. | →Stable |
| CounterThe low multiple may reflect the market pricing in a meaningful deceleration in growth not yet visible in trailing figures; if revenue growth drops materially from its current pace, the apparent cheapness would dissolve. | ||
The company has beaten consensus earnings estimates in all four of the most recent quarters, delivering an average positive surprise of roughly 3%, a pattern consistent with management consistently under-promising and over-delivering. Earnings | The beat streak extends to six consecutive quarters, with each of the next two reporting periods showing a positive EPS surprise. | →Stable |
| CounterAn average beat of roughly 3% per quarter is narrow, leaving limited cushion if operating costs accelerate; a single quarter where results merely meet estimates would break the streak and likely weigh on the multiple. | ||
Price sits below the 200-day moving average with the slope declining at 3.5% over the past 30 days, a death cross has hard-blocked the entry, and on-balance volume is falling — a combination indicating that the price trend has not yet bottomed. Momentum breakdown | The death cross resolves to the upside, price reclaims the 200-day moving average, and on-balance volume turns positive — all within 12 months. | →Stable |
| CounterDeath crosses in high-quality software businesses have at times been temporary headwinds driven by sector rotation rather than company-specific deterioration; if macro conditions stabilize, the technical damage could reverse more quickly than the current slope suggests. | ||
With a return on equity of 40%, net margins of 19%, free cash flow running at 146% of net income, a Rule of 40 score of 55, and a wide economic moat, this is a software business that consistently converts growth into durable cash returns.
→StableQuality breakdown
- Expectation
- Free cash flow stays above 100% of net income and operating margins hold above 15% over the next four quarters, confirming that the quality of earnings is not deteriorating.
CounterLeverage of 3.2x debt-to-equity amplifies the quality picture; if cash flows soften, debt-service pressure could erode the margin profile and compress the multiple well below current levels.
Revenue growing at 27% year over year trades at a forward earnings multiple of 7.4x and a price-to-growth ratio of 1.40, making the growth profile unusually inexpensive relative to the pace of earnings expansion.
→StableValuation breakdown
- Expectation
- The discount between the growth rate and the earnings multiple narrows as the stock re-rates toward a forward multiple of 12x or above within 12 months.
CounterThe low multiple may reflect the market pricing in a meaningful deceleration in growth not yet visible in trailing figures; if revenue growth drops materially from its current pace, the apparent cheapness would dissolve.
The company has beaten consensus earnings estimates in all four of the most recent quarters, delivering an average positive surprise of roughly 3%, a pattern consistent with management consistently under-promising and over-delivering.
→StableEarnings
- Expectation
- The beat streak extends to six consecutive quarters, with each of the next two reporting periods showing a positive EPS surprise.
CounterAn average beat of roughly 3% per quarter is narrow, leaving limited cushion if operating costs accelerate; a single quarter where results merely meet estimates would break the streak and likely weigh on the multiple.
Price sits below the 200-day moving average with the slope declining at 3.5% over the past 30 days, a death cross has hard-blocked the entry, and on-balance volume is falling — a combination indicating that the price trend has not yet bottomed.
→StableMomentum breakdown
- Expectation
- The death cross resolves to the upside, price reclaims the 200-day moving average, and on-balance volume turns positive — all within 12 months.
CounterDeath crosses in high-quality software businesses have at times been temporary headwinds driven by sector rotation rather than company-specific deterioration; if macro conditions stabilize, the technical damage could reverse more quickly than the current slope suggests.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Gen Digital is a high-quality software franchise delivering 27% revenue growth at a forward earnings multiple of 7.4x with four consecutive earnings beats, but a confirmed death cross and a falling 200-day moving average mean the technical setup has not yet cleared; the quality and valuation case is intact while the entry timing remains unfavorable.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
8.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 5.8 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 9.7 |
| Current ratio | 1.6 |
| FCF quality | 9.9 |
| Moat | 7.5 |
| Rule of 40 | 8.9 |
| Piotroski F | 7.8 |
- ▸Excellent ROE: 40%
- ▸Strong margins: 19%
- ▸Excellent cash conversion: 146% FCF/NI
- ▸Wide economic moat
Growth
9.6/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 9.2 |
| EPS growth | 10.0 |
- ▸Strong growth: 27% YoY
Momentum
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 8.0 |
| Volume | 0.9 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-MA but MA slope flat
Sentiment
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 6.8 |
| erm sentiment | 5.7 |
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Insider selling (low materiality) — $2,397,129 (0.015% of mkt cap)
Peer rank
5.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 6.3 |
| quality rank | 8.6 |
| growth rank | 7.2 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
3.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.7 |
| support resistance | 0.9 |
| 52w position | 6.8 |
| gap | 6.0 |
Risk (lower is worse)
5.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.8 |
| days to cover | 6.7 |
| volatility | 3.4 |
| put call | 10.0 |
| implied vol | 3.9 |
| beta | 6.2 |
| debt equity | 1.8 |
Catalyst
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 4.1 |
| dividend safety | 5.2 |
- ▸Perfect beat streak: 4Q
- ▸Dividend: 187.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (8)
- MOMENTUM:6.8>=5.5
- INSIDER:OK
- DEATH_CROSS:QUALITY_MOMENTUM_EXEMPT
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:32d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.1=NEGATIVE
Warning (1)
- DEATH_CROSS:quality=8.1>=7.5+momentum=6.8>=5.0 exempted
Reward-to-Risk
-0.12
Upside
-1.9%
Downside
15.0%
Sizing output
AVOID
SetupMomentum Cont — Trend continuation, RSI 67, MACD bullish
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 9.6) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-0.1=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.12 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 9.6, Quality at 8.1, and Momentum at 6.8; the weakest are Technical at 3.6, Insider at 5.0, and Risk (lower is worse) at 5.5. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -0.12 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 Franchise
Trip ifFree cash flow falls below 100% of net income for 2 consecutive quarters, indicating the cash-conversion quality advantage has eroded.
- P2Consistent Earnings Beat Streak
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, breaking the beat streak.
- P3Growth At Attractive Valuation
Trip ifRevenue growth falls below 15% year over year for 2 consecutive quarters, eliminating the growth-at-a-discount premise.
- P4Confirmed Death Cross Technical Headwind
Trip ifPrice rises above the 200-day moving average and on-balance volume turns positive for 4 consecutive weeks, falsifying the downtrend pillar.