Value
5.8/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 0.0 |
| P/S | 7.7 |
| Fwd P/E | 2.2 |
| PEG | 10.0 |
| Analyst target | 9.0 |
- ▸Forward P/E: 53.1x
- ▸PEG: 0.41
HCM · Why this verdict
Why HUTCHMED (China) (HCM) 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 score4.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
A specialty pharmaceutical developer with reported margins of 83% and a return on equity of 45% is undermined by 16% revenue contraction, a Piotroski F-Score of just 1 out of 9, a hard-blocked technical downtrend, and a forward P/E that implies a near-complete collapse in near-term earnings — making this a situation where patience is warranted until the fundamental and technical picture improves materially, despite a large stated upside to analyst consensus.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Revenue declined 16% year-over-year, and with no evidence of an impending inflection, the growth dimension scores at the weakest possible level — a direct contradiction to any forward thesis that this is a growth asset, regardless of headline margin or return metrics. Growth breakdown | Revenue growth turns positive (above 0%) for 2 consecutive reporting periods, confirming the contraction has bottomed and a recovery is underway. | →Stable |
| CounterIn specialty pharmaceutical development, revenue can be lumpy around drug approvals, licensing events, or partnerships; a 16% decline may reflect a natural trough between pipeline catalysts rather than permanent impairment to the top line. | ||
Despite reported margins of 83% and a return on equity of 45%, the Piotroski F-Score stands at just 1 out of 9 — the weakest possible financial health signal — and free cash flow is negative relative to net income, indicating that the attractive headline figures mask severe underlying financial strain. Quality breakdown | Piotroski F-Score rises above 5 out of 9 for 2 consecutive annual periods, confirming the financial health picture is genuinely improving. | →Stable |
| CounterA single reporting period with weak working capital or cash flow dynamics can depress the Piotroski score temporarily; if the underlying business drivers remain sound, the score could recover to the midrange within one or two quarters as the balance sheet normalizes. | ||
A confirmed death cross, momentum well below the minimum passing threshold, falling on-balance volume, and a 200-day moving average sloping downward at 4.9% per month collectively constitute a hard technical block — price has no confirmed floor and every technical signal points to continued selling pressure. Engine gate (failed) | The death cross reverses (short-term moving average crosses back above the long-term average) and is maintained for 4 consecutive weeks, confirming the downtrend has ended. | →Stable |
| CounterWith analyst consensus implying roughly 83% upside to the price target, a single pipeline catalyst or positive regulatory event could produce a sharp re-rating that breaks the technical structure to the upside before the moving averages have time to recover. | ||
The trailing P/E is near 4x — implying very high recent earnings — while the forward P/E has expanded to roughly 22x, a more than five-fold expansion that signals the market expects a dramatic decline in near-term earnings; this pattern is consistent with a cyclical earnings peak that makes current reported profitability a potentially misleading anchor for valuation. Bear case | Forward P/E compresses back below 10x from the current 22x as earnings guidance stabilizes or recovers, removing the cyclical-peak concern. | →Stable |
| CounterIf the large upside to the analyst consensus price target materializes through pipeline progress or commercial ramp, the forward P/E expansion may simply reflect a transitory earnings trough rather than structural impairment, and the stock could re-rate sharply as those earnings recover. | ||
Revenue declined 16% year-over-year, and with no evidence of an impending inflection, the growth dimension scores at the weakest possible level — a direct contradiction to any forward thesis that this is a growth asset, regardless of headline margin or return metrics.
→StableGrowth breakdown
- Expectation
- Revenue growth turns positive (above 0%) for 2 consecutive reporting periods, confirming the contraction has bottomed and a recovery is underway.
CounterIn specialty pharmaceutical development, revenue can be lumpy around drug approvals, licensing events, or partnerships; a 16% decline may reflect a natural trough between pipeline catalysts rather than permanent impairment to the top line.
Despite reported margins of 83% and a return on equity of 45%, the Piotroski F-Score stands at just 1 out of 9 — the weakest possible financial health signal — and free cash flow is negative relative to net income, indicating that the attractive headline figures mask severe underlying financial strain.
→StableQuality breakdown
- Expectation
- Piotroski F-Score rises above 5 out of 9 for 2 consecutive annual periods, confirming the financial health picture is genuinely improving.
CounterA single reporting period with weak working capital or cash flow dynamics can depress the Piotroski score temporarily; if the underlying business drivers remain sound, the score could recover to the midrange within one or two quarters as the balance sheet normalizes.
A confirmed death cross, momentum well below the minimum passing threshold, falling on-balance volume, and a 200-day moving average sloping downward at 4.9% per month collectively constitute a hard technical block — price has no confirmed floor and every technical signal points to continued selling pressure.
→StableEngine gate (failed)
- Expectation
- The death cross reverses (short-term moving average crosses back above the long-term average) and is maintained for 4 consecutive weeks, confirming the downtrend has ended.
CounterWith analyst consensus implying roughly 83% upside to the price target, a single pipeline catalyst or positive regulatory event could produce a sharp re-rating that breaks the technical structure to the upside before the moving averages have time to recover.
The trailing P/E is near 4x — implying very high recent earnings — while the forward P/E has expanded to roughly 22x, a more than five-fold expansion that signals the market expects a dramatic decline in near-term earnings; this pattern is consistent with a cyclical earnings peak that makes current reported profitability a potentially misleading anchor for valuation.
→StableBear case
- Expectation
- Forward P/E compresses back below 10x from the current 22x as earnings guidance stabilizes or recovers, removing the cyclical-peak concern.
CounterIf the large upside to the analyst consensus price target materializes through pipeline progress or commercial ramp, the forward P/E expansion may simply reflect a transitory earnings trough rather than structural impairment, and the stock could re-rate sharply as those earnings recover.
Per-dimension breakdown
Quality
2.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 0.5 |
| ROA | 0.0 |
| Gross margin | 0.0 |
| Op margin | 0.1 |
| Net margin | 1.6 |
| Current ratio | 7.4 |
| FCF quality | 0.0 |
| Moat | 5.2 |
| Piotroski F | 7.8 |
- ▸Earnings quality RED FLAG: -106% FCF/NI
- ▸No competitive moat
- ▸Strong Piotroski F-Score: 7/9
- ▸Quality concerns
Growth
6.2/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 2.5 |
| EPS growth | 10.0 |
Momentum
3.7/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.3 |
| MACD | 8.2 |
| OBV | 1.0 |
| MA position | 6.0 |
| Volume | 0.0 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -4.7%/30d — confirmed downtrend
Sentiment
7.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.2 |
| Price target | 9.9 |
| erm sentiment | 4.6 |
- ▸Analyst upside: 72%
Insider
3.4/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 2.2 |
| notable moves | 3.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
- ▸Institutions reducing
Peer rank
4.1/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.0 |
| quality rank | 4.3 |
| growth rank | 2.6 |
Technical
2.4/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.3 |
| support resistance | 2.3 |
| 52w position | 2.5 |
Risk (lower is worse)
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 9.9 |
| days to cover | 7.4 |
| volatility | 5.8 |
| put call | 2.9 |
| implied vol | 0.0 |
| beta | 10.0 |
| debt equity | 9.7 |
- ▸Elevated put/call: 1.57
- ▸High IV: 348%
Catalyst
4.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
- ▸Strong earnings: 3B/1M
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCK:QUALITY_FLOORPassed (7)
- ASYMMETRY:3.8>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:201d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:3.7<4.5
- DEATH_CROSS:HARD_BLOCK
Warning (0)
none
Reward-to-Risk
3.84
Upside
+49.7%
Downside
13.0%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 67
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $2.1B<$5B
Investment implication
The SELL_IF_HOLDING verdict reflects the MOMENTUM gate's 3.7<4.5 outcome against Sentiment at 7.4 and asymmetric R:R of 3.84.
The strongest dimensions are Sentiment at 7.4, Risk (lower is worse) at 6.5, and Growth at 6.2; the weakest are Technical at 2.4, Quality at 2.5, and Insider at 3.4. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 3.84 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Revenue Contracting 16pct
Trip ifRevenue growth turns positive above 0% for 2 consecutive reporting periods, confirming the contraction has reversed.
- P2Quality Below Floor Piotroski 1 Of 9
Trip ifPiotroski F-Score rises above 5 out of 9 for 2 consecutive annual reporting periods, confirming financial health recovery.
- P3Confirmed Downtrend Hard Technical Block
Trip ifShort-term moving average crosses above the long-term moving average (death cross reversal) and holds for 4 consecutive weeks.
- P4Cyclical Trap Forward Pe Expansion
Trip ifForward P/E compresses below 10x from the current 22x as earnings estimates stabilize or improve.