Value
8.4/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 2.6 |
| P/S | 9.7 |
| EV/EBITDA | 7.4 |
| Fwd P/E | 10.0 |
| PEG | 10.0 |
| Analyst target | 9.0 |
- ▸Forward P/E: 4.7x
- ▸PEG: 0.01
- ▸Attractively valued
MH · Why this verdict
Why McGraw Hill (MH) 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 score4.9/10
ConfidenceHIGH
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
McGraw Hill presents an unusual combination of deeply depressed valuation and a three-quarter earnings-beat streak, yet a confirmed death cross, declining revenue, and a risk composite far below the minimum acceptable level mean the technical and risk profile fully overrides the fundamental appeal, keeping new capital on the sidelines.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Shares trade at a forward P/E of 5.1x with a PEG of 0.01, and the consensus price target implies more than 56% potential appreciation from current levels — a gap that would close if business trends stabilize and sentiment turns. Price targets | Over 12 months, improving fundamental trends allow the stock to narrow the gap toward the analyst consensus target of approximately $16. | Tripped→Stable |
| CounterA compressed multiple can reflect genuine structural decline; with revenue falling 2% and no identifiable competitive moat, re-rating may never materialize regardless of how cheap the stock appears. | ||
Free cash flow runs at 855% of reported net income, indicating the business generates substantially more cash than its accounting earnings alone imply. Quality breakdown | Free cash flow remains above 300% of net income over the next four quarters, confirming the conversion advantage is durable. | →Stable |
| CounterA ratio this elevated is unusual and may reflect favorable working-capital timing or one-time items; if revenue continues to contract, both reported earnings and free cash flow could compress materially. | ||
Three consecutive quarterly earnings beats with an average surprise of 193% suggest management is consistently under-promising and over-delivering against consensus expectations. Earnings | The beat streak extends to a fourth consecutive quarter at the next earnings report in approximately 58 days. | →Stable |
| CounterAn average surprise of 193% may reflect unusually depressed consensus estimates rather than genuine operational outperformance; with revenue declining 2% the business is not growing into those beats. | ||
A confirmed death cross, positioning below all major moving averages, an RSI at 37, and a risk composite of 1.7 — significantly below the minimum acceptable threshold of 3.0 — make this a setup where near-term risk factors dominate and new capital deployment is not warranted. Warnings | If the technical picture improves, the stock would reclaim its 200-day moving average while the risk composite recovers above 3.0. | ↓Deteriorating |
| CounterDeath-cross signals can be false in deeply value-compressed names; the favorable 17-to-1 reward-to-risk geometry and confirmed asymmetry could attract contrarian buyers willing to absorb the technical headwind. | ||
Shares trade at a forward P/E of 5.1x with a PEG of 0.01, and the consensus price target implies more than 56% potential appreciation from current levels — a gap that would close if business trends stabilize and sentiment turns.
Tripped→StablePrice targets
- Expectation
- Over 12 months, improving fundamental trends allow the stock to narrow the gap toward the analyst consensus target of approximately $16.
CounterA compressed multiple can reflect genuine structural decline; with revenue falling 2% and no identifiable competitive moat, re-rating may never materialize regardless of how cheap the stock appears.
Free cash flow runs at 855% of reported net income, indicating the business generates substantially more cash than its accounting earnings alone imply.
→StableQuality breakdown
- Expectation
- Free cash flow remains above 300% of net income over the next four quarters, confirming the conversion advantage is durable.
CounterA ratio this elevated is unusual and may reflect favorable working-capital timing or one-time items; if revenue continues to contract, both reported earnings and free cash flow could compress materially.
Three consecutive quarterly earnings beats with an average surprise of 193% suggest management is consistently under-promising and over-delivering against consensus expectations.
→StableEarnings
- Expectation
- The beat streak extends to a fourth consecutive quarter at the next earnings report in approximately 58 days.
CounterAn average surprise of 193% may reflect unusually depressed consensus estimates rather than genuine operational outperformance; with revenue declining 2% the business is not growing into those beats.
A confirmed death cross, positioning below all major moving averages, an RSI at 37, and a risk composite of 1.7 — significantly below the minimum acceptable threshold of 3.0 — make this a setup where near-term risk factors dominate and new capital deployment is not warranted.
↓DeterioratingWarnings
- Expectation
- If the technical picture improves, the stock would reclaim its 200-day moving average while the risk composite recovers above 3.0.
CounterDeath-cross signals can be false in deeply value-compressed names; the favorable 17-to-1 reward-to-risk geometry and confirmed asymmetry could attract contrarian buyers willing to absorb the technical headwind.
Per-dimension breakdown
Quality
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.3 |
| ROA | 2.4 |
| Gross margin | 10.0 |
| Op margin | 2.8 |
| Net margin | 0.8 |
| Current ratio | 3.1 |
| FCF quality | 10.0 |
| Moat | 4.6 |
| Rule of 40 | 3.0 |
| Piotroski F | 6.7 |
- ▸Excellent cash conversion: 855% FCF/NI
- ▸No competitive moat
- ▸Rule of 40: 12 (fail)
Growth
2.0/10data confidence 33%| Component | Sub-score |
|---|---|
| Rev growth | 2.0 |
- ▸Declining revenue: -2%
Momentum
2.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.5 |
| MACD | 6.1 |
| OBV | 1.0 |
| MA position | 1.0 |
| Volume | 2.9 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -4.4%/30d — confirmed downtrend
Sentiment
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 9.9 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 87%
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.5 |
| holder change | 9.4 |
| notable moves | 7.0 |
- ▸Insider buying (low materiality) — $249,322 (0.014% of mkt cap)
- ▸Institutions accumulating
Peer rank
1.7/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.3 |
| quality rank | 2.0 |
| growth rank | 0.0 |
Technical
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 6.3 |
| support resistance | 7.1 |
| 52w position | 0.6 |
Risk (lower is worse)
3.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.4 |
| days to cover | 9.1 |
| volatility | 0.0 |
| put call | 0.0 |
| implied vol | 0.0 |
| max pain risk | 5.0 |
| debt equity | 1.3 |
- ▸Elevated put/call: 10.00
- ▸High IV: 142%
Catalyst
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
- ▸Strong earnings: 3B/0M
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- ASYMMETRY:5.3>=1.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:19d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:2.9<4.5
- DEATH_CROSS:HARD_BLOCK
Warning (0)
none
Reward-to-Risk
5.28
Upside
+63.0%
Downside
11.9%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeCatalyst-Driven — Earnings in 19d with 3/4 beat streak
SuitabilitySpeculative — Drawdown -47% (>40% off 52w high)
Investment implication
The F-path SELL output reflects an overall score of 3.4 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 8.4) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:2.9<4.5, DEATH_CROSS:HARD_BLOCK) reinforce the read. Current asymmetry R:R is 5.28 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 8.4, Catalyst at 7.5, and Insider at 7.3; the weakest are Peer rank at 1.7, Growth at 2.0, and Momentum at 2.9. The V9 engine flagged 2 failed gates, producing an asymmetric reward-to-risk of 5.28 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Deep Value Analyst GapTripped
Trip ifConsensus analyst price target falls below $13.00, cutting implied upside below 25% from the current price of $10.29.
- P2Earnings Beat Consistency
Trip ifEPS surprise falls below 0% in the next reported quarter.
- P3Exceptional Cash Conversion
Trip ifFree cash flow falls below 200% of net income for 2 consecutive quarters.
- P4Technical Risk Blocks Entry
Trip ifStock reclaims its 200-day moving average and RSI rises above 50 for 4 consecutive weeks.