Value
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 9.2 |
| P/S | 9.0 |
| EV/EBITDA | 3.8 |
| Fwd P/E | 7.6 |
| PEG | 4.5 |
| Analyst target | 4.0 |
- ▸Forward P/E: 16.2x
- ▸PEG: 2.03
MKC · Why this verdict
Why McCormick & Company, Incorporat (MKC) 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 score5.3/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company holds a wide economic moat, generates a return on equity of 25%, and posts margins that rank among the best in its peer group — characteristics of a franchise that has compounded returns through multiple market cycles and is likely to maintain its competitive position. Quality breakdown | Return on equity stays above 20% and operating margin stays above 18% for the next four consecutive quarters. | →Stable |
| CounterA forward earnings multiple that is expanding as earnings normalize means the cost of owning the business is rising faster than reported profits; if revenue growth continues to soften, multiple expansion could reverse abruptly and compress the stock. | ||
The consensus analyst target implies approximately 11% upside from the current price at a forward earnings multiple near 14 times — an undemanding valuation for a wide-moat consumer staples business that provides a margin of safety for investors entering at current levels. Bull case | Stock price closes above $53.27 within the next four quarters, capturing the upside implied by the current valuation discount. | →Stable |
| CounterA forward multiple that is expanding as earnings normalize means the current multiple understates the true cost of ownership if earnings growth decelerates; the apparent margin of safety may not be as wide as it appears if forward estimates are revised lower. | ||
Free cash flow amounts to only 23% of net income, a significant divergence flagged as a quality concern that raises questions about whether strong reported earnings are translating into cash available for dividends, debt reduction, or reinvestment. Quality breakdown | Free cash flow as a percentage of net income rises above 50% for two consecutive quarters, demonstrating meaningful improvement in cash conversion. | →Stable |
| CounterA mature consumer staples business with strong earnings consistency often trades at a premium despite moderate cash conversion; if the gap reflects transient working-capital dynamics, the quality concern may prove temporary. | ||
The company has beaten consensus EPS estimates in three of the last four quarters with an average positive surprise of approximately 5%, and an earnings report due in nine days provides a near-term catalyst that could arrest the current technical downtrend. Earnings | The company beats consensus EPS estimates by more than 3% in the upcoming quarter, extending the overall beat pattern. | →Stable |
| CounterReading the earnings history chronologically — two beats, then a miss, then the most recent beat — the pattern is not a clean streak; a second consecutive miss in the upcoming report could accelerate selling from investors who bought in anticipation of a recovery. | ||
The stock is trading below its 200-day moving average, which is itself declining at approximately 5% per month — a confirmed downtrend that represents a meaningful near-term headwind even for a high-quality franchise. Bear case | The stock closes above its 200-day moving average for 10 consecutive trading sessions and the moving average slope turns positive, signaling the downtrend has been broken. | →Stable |
| CounterThe MACD is improving and the RSI is supportive near 56, suggesting the worst of the selling pressure may already be priced in; a strong earnings result could reverse the trend quickly in a lower-volatility defensive name. | ||
The company holds a wide economic moat, generates a return on equity of 25%, and posts margins that rank among the best in its peer group — characteristics of a franchise that has compounded returns through multiple market cycles and is likely to maintain its competitive position.
→StableQuality breakdown
- Expectation
- Return on equity stays above 20% and operating margin stays above 18% for the next four consecutive quarters.
CounterA forward earnings multiple that is expanding as earnings normalize means the cost of owning the business is rising faster than reported profits; if revenue growth continues to soften, multiple expansion could reverse abruptly and compress the stock.
The consensus analyst target implies approximately 11% upside from the current price at a forward earnings multiple near 14 times — an undemanding valuation for a wide-moat consumer staples business that provides a margin of safety for investors entering at current levels.
→StableBull case
- Expectation
- Stock price closes above $53.27 within the next four quarters, capturing the upside implied by the current valuation discount.
CounterA forward multiple that is expanding as earnings normalize means the current multiple understates the true cost of ownership if earnings growth decelerates; the apparent margin of safety may not be as wide as it appears if forward estimates are revised lower.
Free cash flow amounts to only 23% of net income, a significant divergence flagged as a quality concern that raises questions about whether strong reported earnings are translating into cash available for dividends, debt reduction, or reinvestment.
→StableQuality breakdown
- Expectation
- Free cash flow as a percentage of net income rises above 50% for two consecutive quarters, demonstrating meaningful improvement in cash conversion.
CounterA mature consumer staples business with strong earnings consistency often trades at a premium despite moderate cash conversion; if the gap reflects transient working-capital dynamics, the quality concern may prove temporary.
The company has beaten consensus EPS estimates in three of the last four quarters with an average positive surprise of approximately 5%, and an earnings report due in nine days provides a near-term catalyst that could arrest the current technical downtrend.
→StableEarnings
- Expectation
- The company beats consensus EPS estimates by more than 3% in the upcoming quarter, extending the overall beat pattern.
CounterReading the earnings history chronologically — two beats, then a miss, then the most recent beat — the pattern is not a clean streak; a second consecutive miss in the upcoming report could accelerate selling from investors who bought in anticipation of a recovery.
The stock is trading below its 200-day moving average, which is itself declining at approximately 5% per month — a confirmed downtrend that represents a meaningful near-term headwind even for a high-quality franchise.
→StableBear case
- Expectation
- The stock closes above its 200-day moving average for 10 consecutive trading sessions and the moving average slope turns positive, signaling the downtrend has been broken.
CounterThe MACD is improving and the RSI is supportive near 56, suggesting the worst of the selling pressure may already be priced in; a strong earnings result could reverse the trend quickly in a lower-volatility defensive name.
TrendMatrix Research · core thesis
Engine thesis — one sentence
McCormick is a wide-moat consumer franchise with best-in-class margins and three beats in the last four quarters trading below its 200-day moving average — with earnings nine days away, the technical downtrend may prove transient if the company delivers again, but a persistent free cash flow quality gap warrants ongoing monitoring.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 8.2 |
| ROA | 3.4 |
| Gross margin | 3.8 |
| Op margin | 7.0 |
| Net margin | 10.0 |
| Current ratio | 3.1 |
| FCF quality | 3.5 |
| Moat | 7.5 |
| Piotroski F | 6.7 |
- ▸Strong margins: 22%
- ▸Earnings quality RED FLAG: 44% FCF/NI
- ▸Wide economic moat
- ▸Compounder quality: strong returns + growth
Growth
3.4/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 6.7 |
| EPS growth | 0.0 |
Momentum
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.6 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 2.2 |
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -4.8%/30d — confirmed downtrend
Sentiment
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 2.5 |
| Analyst rating | 7.2 |
| Price target | 6.9 |
- ▸LLM news sentiment: -0.50 (n=1)
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Negligible insider buying — $105,960 (0.001% of mkt cap)
Peer rank
5.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.6 |
| quality rank | 9.2 |
| growth rank | 8.1 |
- ▸Superior ROE vs peers
- ▸Best-in-class margins
Technical
1.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.0 |
| support resistance | 0.5 |
| 52w position | 4.1 |
Risk (lower is worse)
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| volatility | 4.4 |
| put call | 10.0 |
| implied vol | 4.6 |
| beta | 9.2 |
| debt equity | 7.1 |
Catalyst
5.8/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 6.0 |
| dividend safety | 7.0 |
| news activity | 5.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 359.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (5)
- MOMENTUM:6.4>=5.5
- INSIDER:OK
- EARNINGS_PROXIMITY:95d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.1=NEGATIVE
Warning (2)
- DEATH_CROSS:momentum=6.4>=5.0 recovering
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.07
Upside
-1.1%
Downside
14.5%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 64
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 5.3 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 7.1) 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 -0.07 — supplementary context, not the trigger for this path.
The strongest dimensions are Risk (lower is worse) at 7.1, Momentum at 6.4, and Value at 6.2; the weakest are Technical at 1.5, Growth at 3.4, and Insider at 5.0. The V9 engine flagged 1 failed gate with 2 warnings, producing an asymmetric reward-to-risk of -0.07 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Wide Moat Superior Margins
Trip ifOperating margin compresses below 15% for 2 consecutive quarters.
- P2Earnings Beat Streak Upcoming Catalyst
Trip ifEPS surprise falls below 0% for 2 consecutive quarters.
- P3Fcf Conversion Quality Gap
Trip ifFree cash flow as a percentage of net income rises above 50% for 2 consecutive quarters.
- P4Confirmed Downtrend Technical Risk
Trip ifStock closes above its 200-day moving average for 10 consecutive trading sessions.
- P5Valuation Margin Of Safety
Trip ifConsensus analyst price target falls below $50.00.