Value
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 2.5 |
| P/S | 8.7 |
| EV/EBITDA | 2.4 |
| Fwd P/E | 7.6 |
| PEG | 4.5 |
| Analyst target | 5.0 |
- ▸Forward P/E: 16.1x
- ▸PEG: 2.04
RRX · Why this verdict
Why Regal Rexnord (RRX) 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
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company beat earnings estimates in 3 of the last 4 quarters, delivering small but consistent positive surprises averaging approximately 1.1%, reflecting disciplined cost management against consensus estimates. Earnings | Earnings beats continue in at least 3 of the next 4 quarters, with EPS surprises averaging above 0% on a cumulative basis. | →Stable |
| CounterThe average surprise of 1.1% is thin, the miss was on the negative side, and the supplier concentration risk from limited supplier dependence could drive unexpected cost inflation that disrupts the beat pattern. | ||
Reliance on a single or limited number of suppliers is flagged as a high concentration risk, and operating and net margins are well below industry peers, limiting the business's ability to absorb supply chain disruptions. Bear case | Operating margin expands by at least 2 percentage points over the next 12 months as efficiency initiatives translate to earnings improvement. | →Stable |
| CounterThe company has no identified competitive moat, which means it lacks pricing power to offset input cost increases, making supplier concentration a potentially severe risk during periods of supply chain stress. | ||
Free cash flow conversion runs at 275% of net income, indicating the company generates significantly more cash than its reported earnings suggest, which provides financial flexibility for debt reduction or capital allocation. Quality breakdown | Free cash flow as a percentage of net income remains above 150% over the next 12 months, sustaining the cash generation advantage over book earnings. | →Stable |
| CounterDespite superior cash conversion, operating and net margins are thin, and return on equity of just above 1% suggests the business does not earn attractive returns on its capital base despite the cash flow profile. | ||
The stock has formed a pattern consistent with a breakout, with a golden cross in moving averages, rising on-balance volume showing accumulation, and a momentum score of 7.7 indicating strong near-term price strength. Momentum breakdown | Price momentum score remains above 6.0 and on-balance volume trend stays positive over the next 12 months. | →Stable |
| CounterWith price already at the analyst target and zero upside remaining by that measure, further price appreciation would require analyst target increases, which may not materialize given weak operating margins. | ||
The company beat earnings estimates in 3 of the last 4 quarters, delivering small but consistent positive surprises averaging approximately 1.1%, reflecting disciplined cost management against consensus estimates.
→StableEarnings
- Expectation
- Earnings beats continue in at least 3 of the next 4 quarters, with EPS surprises averaging above 0% on a cumulative basis.
CounterThe average surprise of 1.1% is thin, the miss was on the negative side, and the supplier concentration risk from limited supplier dependence could drive unexpected cost inflation that disrupts the beat pattern.
Reliance on a single or limited number of suppliers is flagged as a high concentration risk, and operating and net margins are well below industry peers, limiting the business's ability to absorb supply chain disruptions.
→StableBear case
- Expectation
- Operating margin expands by at least 2 percentage points over the next 12 months as efficiency initiatives translate to earnings improvement.
CounterThe company has no identified competitive moat, which means it lacks pricing power to offset input cost increases, making supplier concentration a potentially severe risk during periods of supply chain stress.
Free cash flow conversion runs at 275% of net income, indicating the company generates significantly more cash than its reported earnings suggest, which provides financial flexibility for debt reduction or capital allocation.
→StableQuality breakdown
- Expectation
- Free cash flow as a percentage of net income remains above 150% over the next 12 months, sustaining the cash generation advantage over book earnings.
CounterDespite superior cash conversion, operating and net margins are thin, and return on equity of just above 1% suggests the business does not earn attractive returns on its capital base despite the cash flow profile.
The stock has formed a pattern consistent with a breakout, with a golden cross in moving averages, rising on-balance volume showing accumulation, and a momentum score of 7.7 indicating strong near-term price strength.
→StableMomentum breakdown
- Expectation
- Price momentum score remains above 6.0 and on-balance volume trend stays positive over the next 12 months.
CounterWith price already at the analyst target and zero upside remaining by that measure, further price appreciation would require analyst target increases, which may not materialize given weak operating margins.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Regal Rexnord has strong price momentum and exceptional free cash flow conversion well above reported earnings, but a perfect Piotroski score is undermined by weak profitability margins, below-average peer ranking, and zero remaining upside to the analyst consensus target.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 1.4 |
| ROA | 2.1 |
| Gross margin | 3.5 |
| Op margin | 4.5 |
| Net margin | 2.4 |
| Current ratio | 7.5 |
| FCF quality | 10.0 |
| Moat | 5.2 |
| Piotroski F | 10.0 |
- ▸Excellent cash conversion: 275% FCF/NI
- ▸No competitive moat
- ▸Strong Piotroski F-Score: 9/9
Growth
4.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.6 |
| EPS growth | 4.3 |
Momentum
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 6.0 |
| Volume | 5.7 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 5.6 |
| Analyst rating | 8.0 |
| Price target | 7.2 |
- ▸Light analyst coverage (9.0) — signal dampened
Insider
3.8/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.0 |
- ▸Modest insider selling — $8,305,645 (0.057% of mkt cap)
Peer rank
2.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 4.6 |
| quality rank | 2.5 |
| growth rank | 2.8 |
Technical
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 5.0 |
| support resistance | 6.0 |
| 52w position | 7.6 |
Risk (lower is worse)
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.2 |
| days to cover | 7.1 |
| volatility | 0.0 |
| put call | 5.1 |
| implied vol | 2.0 |
| beta | 6.7 |
| debt equity | 6.7 |
- ▸High IV: 68%
- ▸Concentration risks: 1 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
5.5/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 3.0 |
| dividend safety | 5.2 |
| news activity | 8.0 |
- ▸Strong earnings: 3B/1M
- ▸Dividend: 64.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:5.6>=5.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:31d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.1<1.5@spot
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.07
Upside
+0.8%
Downside
11.5%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 54, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.9 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Sentiment at 7.0) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.1<1.5@spot) reinforce the read. Current asymmetry R:R is 0.07 — supplementary context, not the trigger for this path.
The strongest dimensions are Sentiment at 7.0, Technical at 6.2, and Momentum at 5.6; the weakest are Peer rank at 2.5, Insider at 3.8, and Growth at 4.0. The V9 engine flagged 1 failed gate with 1 warning, 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.
- P1Exceptional Free Cash Flow Conversion
Trip ifFree cash flow as a percentage of net income falls below 100%, more than 175 percentage points below the current 275% level, indicating a structural deterioration in cash generation.
- P2Strong Price Momentum Breakout
Trip ifMomentum score drops below 5.0, indicating the breakout pattern has failed and selling pressure has returned.
- P3Earnings Beat Streak Consistency
Trip ifEPS surprise falls below 0% in at least 2 of the next 4 quarters, breaking the recent beat pattern.
- P4Supplier Concentration And Low Margins
Trip ifOperating margin falls below 3%, more than 2 percentage points below its current level, indicating worsening cost pressure from supplier concentration.