Value
8.1/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 9.2 |
| P/S | 9.7 |
| EV/EBITDA | 7.3 |
| Fwd P/E | 7.5 |
| PEG | 8.0 |
- ▸Forward P/E: 16.6x
- ▸PEG: 0.84
- ▸Attractively valued
GHC · Why this verdict
Why Graham Holdings (GHC) 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 score5.7/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Graham Holdings combines a strong earnings beat record averaging approximately 19 percentage points above consensus with powerful technical momentum in a breakout configuration, but the stock has substantially overrun analyst consensus estimates and the free cash flow conversion of 70% relative to net income warrants monitoring before adding to the position.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company beat earnings consensus in 3 of the last 4 reported quarters with an average positive surprise of approximately 19 percentage points, including beats of 28%, 25%, and 41% in the three oldest quarters — a track record of consistently delivering well above what the street modeled. Earnings | Continued earnings beats over the next two quarters will reinforce the pattern of outperformance and support the case for maintaining the position at current valuation levels. | →Stable |
| CounterLarge average surprises can reflect a conservative guidance approach rather than structural acceleration; if the guidance discipline breaks down — as the one miss of 18.5% below consensus suggests can happen — the reset can be abrupt and severe. | ||
The stock is in a confirmed breakout configuration — above all moving averages, MACD in a bullish posture, and an RSI of 54 — with the golden cross providing a constructive longer-term technical signal that price momentum is well-established and participating broad volume accumulation. Momentum breakdown | If the technical setup holds, the stock should continue to trend above key moving averages and reach the near-term technical target over the next quarter as momentum carries the breakout forward. | Tripped↑Improving |
| CounterBreakout setups in smaller-capitalization consumer-defensive names can fail quickly if an earnings miss reverses the MACD and RSI trajectory; the breakout has not yet been tested by an adverse catalyst. | ||
The stock has substantially exceeded analyst consensus price estimates, meaning that even if earnings continue to beat, further price appreciation requires the street to meaningfully upgrade its targets — an outcome that is possible but not guaranteed and leaves the downside asymmetry unfavorable at the current level. Warnings | With unfavorable risk-reward geometry at current prices, the setup favors patience; a correction toward consensus would improve the entry dramatically and re-establish a positive expected return. | Tripped→Stable |
| CounterA stock that has persistently outrun analyst price targets can do so because the fundamental earning power is greater than the street models; three consecutive quarters of large beats suggest analysts may be systematically underestimating the business. | ||
Free cash flow conversion at 70% of net income triggers an earnings quality flag, indicating that reported earnings are running ahead of actual cash generation — a gap worth monitoring because it means the reported profit picture is more optimistic than the cash the business is actually producing. Quality breakdown | If free cash flow conversion rises toward 90% or above over the next two quarters, the earnings quality concern will resolve and the gap between reported and cash earnings will narrow to an acceptable range. | →Stable |
| CounterA 70% conversion ratio is common in businesses investing in working capital or making bolt-on acquisitions to sustain revenue growth; if the deployment is value-creating, the temporary gap between earnings and cash does not reflect impaired earnings quality. | ||
The company beat earnings consensus in 3 of the last 4 reported quarters with an average positive surprise of approximately 19 percentage points, including beats of 28%, 25%, and 41% in the three oldest quarters — a track record of consistently delivering well above what the street modeled.
→StableEarnings
- Expectation
- Continued earnings beats over the next two quarters will reinforce the pattern of outperformance and support the case for maintaining the position at current valuation levels.
CounterLarge average surprises can reflect a conservative guidance approach rather than structural acceleration; if the guidance discipline breaks down — as the one miss of 18.5% below consensus suggests can happen — the reset can be abrupt and severe.
The stock is in a confirmed breakout configuration — above all moving averages, MACD in a bullish posture, and an RSI of 54 — with the golden cross providing a constructive longer-term technical signal that price momentum is well-established and participating broad volume accumulation.
Tripped↑ImprovingMomentum breakdown
- Expectation
- If the technical setup holds, the stock should continue to trend above key moving averages and reach the near-term technical target over the next quarter as momentum carries the breakout forward.
CounterBreakout setups in smaller-capitalization consumer-defensive names can fail quickly if an earnings miss reverses the MACD and RSI trajectory; the breakout has not yet been tested by an adverse catalyst.
The stock has substantially exceeded analyst consensus price estimates, meaning that even if earnings continue to beat, further price appreciation requires the street to meaningfully upgrade its targets — an outcome that is possible but not guaranteed and leaves the downside asymmetry unfavorable at the current level.
Tripped→StableWarnings
- Expectation
- With unfavorable risk-reward geometry at current prices, the setup favors patience; a correction toward consensus would improve the entry dramatically and re-establish a positive expected return.
CounterA stock that has persistently outrun analyst price targets can do so because the fundamental earning power is greater than the street models; three consecutive quarters of large beats suggest analysts may be systematically underestimating the business.
Free cash flow conversion at 70% of net income triggers an earnings quality flag, indicating that reported earnings are running ahead of actual cash generation — a gap worth monitoring because it means the reported profit picture is more optimistic than the cash the business is actually producing.
→StableQuality breakdown
- Expectation
- If free cash flow conversion rises toward 90% or above over the next two quarters, the earnings quality concern will resolve and the gap between reported and cash earnings will narrow to an acceptable range.
CounterA 70% conversion ratio is common in businesses investing in working capital or making bolt-on acquisitions to sustain revenue growth; if the deployment is value-creating, the temporary gap between earnings and cash does not reflect impaired earnings quality.
Per-dimension breakdown
Quality
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 4.0 |
| ROA | 2.9 |
| Gross margin | 2.0 |
| Op margin | 7.9 |
| Net margin | 5.3 |
| Current ratio | 6.6 |
| FCF quality | 4.0 |
| Moat | 5.0 |
| Piotroski F | 7.8 |
- ▸Earnings quality RED FLAG: 49% FCF/NI
- ▸No competitive moat
- ▸Strong Piotroski F-Score: 7/9
Growth
4.3/10data confidence 33%| Component | Sub-score |
|---|---|
| Rev growth | 4.3 |
Momentum
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 8.0 |
| MACD | 0.0 |
| OBV | 10.0 |
| MA position | 4.0 |
| Volume | 5.0 |
- ▸Uptrend pullback (RSI 35) - buy opportunity
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
4.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 3.3 |
| erm sentiment | 5.0 |
- ▸Below analyst target
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
6.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.2 |
| quality rank | 5.0 |
| growth rank | 5.9 |
Technical
7.9/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 8.6 |
| support resistance | 7.4 |
| 52w position | 7.8 |
Risk (lower is worse)
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 5.4 |
| days to cover | 3.7 |
| volatility | 4.4 |
| beta | 8.7 |
| debt equity | 8.8 |
Catalyst
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
| dividend safety | 6.8 |
- ▸Strong earnings: 3B/1M
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:5.4>=4.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:54d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-3.9=NEGATIVE
Warning (1)
- MOMENTUM:5.4<5.5 (soft — BUY_NOW allowed but watch)
Reward-to-Risk
-3.89
Upside
-25.1%
Downside
6.4%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $4.7B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.5 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 8.1) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:-3.9=NEGATIVE) reinforce the read. Current asymmetry R:R is -3.89 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 8.1, Technical at 7.9, and Catalyst at 6.7; the weakest are Growth at 4.3, Sentiment at 4.4, and Insider at 5.0. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of -3.89 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Consistent Earnings Outperformance
Trip ifEPS surprise falls below 0% for 2 consecutive quarters, breaking the pattern of consistent outperformance.
- P2Technical Breakout With Strong MomentumTripped
Trip ifRSI falls below 45 and MACD crosses below zero simultaneously, confirming the breakout configuration has reversed.
- P3Stock Substantially Above Analyst ConsensusTripped
Trip ifAnalyst consensus price target is revised upward above $1,100 by a majority of covering analysts, reducing the above-consensus overhang and restoring meaningful upside at the current price.
- P4Free Cash Flow Conversion Quality Concern
Trip ifFree cash flow conversion rises above 90% of net income for 2 consecutive quarters, confirming the earnings quality gap has closed.