Value
8.6/10data confidence 67%| Component | Sub-score |
|---|---|
| P/S | 10.0 |
| EV/EBITDA | 5.9 |
| Fwd P/E | 8.2 |
| PEG | 10.0 |
- ▸Forward P/E: 14.5x
- ▸PEG: 0.02
- ▸Attractively valued
SCL · Why this verdict
Why Stepan (SCL) 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 score4.8/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The stock trades at a PEG ratio of 0.02 — effectively zero — and a forward price-to-earnings of 13.9x against a peer group where the stock screens as the top value name, with analysts targeting a price approximately 38% above the current $54.47. Valuation breakdown | Price rises above $63, more than 15% above the current $54.47, within 12 months as the valuation discount begins to close. | →Stable |
| CounterAn extremely low PEG ratio alongside consecutive earnings misses often indicates the growth estimate that forms the denominator is not achievable; the cheap multiple may persist because the growth required to justify it is unlikely to materialize. | ||
The stock has crossed into a golden cross breakout pattern — above all major moving averages with RSI at 61 and MACD bullish — and shows rising on-balance volume accumulation, suggesting institutional buyers are building positions ahead of a potential fundamental recovery. V9 | Price holds above the 200-day moving average and RSI stays above 50 for at least 60 consecutive trading days. | →Stable |
| CounterTechnical breakouts driven by accumulation in low-quality stocks can reflect speculative rotation rather than fundamental improvement; without earnings quality improvement, breakouts in below-minimum-quality companies have a higher failure rate. | ||
Business quality is at 2.2 out of 10, with near-zero scores on return on equity, gross margins, operating margins, and net margins, and no identified competitive moat, indicating the business is currently generating minimal economic value. Quality breakdown | Quality score improves above 4.0 within 12 months as specialty chemicals volumes and pricing recover from a trough. | →Stable |
| CounterSpecialty chemicals is a highly cyclical sector where margins can swing dramatically with volume utilization; current near-zero margins may reflect a cyclical trough rather than structural impairment, and recovery can be rapid when volumes improve. | ||
The company missed earnings estimates in 3 of the last 4 quarters with an average negative surprise of -38%, including a -105% miss in February 2026 where actual EPS turned negative, indicating that forecasts remain significantly above what operations can currently deliver. Earnings | EPS surprise rises above 0% in at least 2 of the next 4 quarters, confirming that the estimate reset has produced achievable targets. | →Stable |
| CounterThe most recent quarter showed a 16.9% positive beat, which may signal the estimate reset is complete and that management has finally guided to a level that operations can achieve. | ||
The stock trades at a PEG ratio of 0.02 — effectively zero — and a forward price-to-earnings of 13.9x against a peer group where the stock screens as the top value name, with analysts targeting a price approximately 38% above the current $54.47.
→StableValuation breakdown
- Expectation
- Price rises above $63, more than 15% above the current $54.47, within 12 months as the valuation discount begins to close.
CounterAn extremely low PEG ratio alongside consecutive earnings misses often indicates the growth estimate that forms the denominator is not achievable; the cheap multiple may persist because the growth required to justify it is unlikely to materialize.
The stock has crossed into a golden cross breakout pattern — above all major moving averages with RSI at 61 and MACD bullish — and shows rising on-balance volume accumulation, suggesting institutional buyers are building positions ahead of a potential fundamental recovery.
→StableV9
- Expectation
- Price holds above the 200-day moving average and RSI stays above 50 for at least 60 consecutive trading days.
CounterTechnical breakouts driven by accumulation in low-quality stocks can reflect speculative rotation rather than fundamental improvement; without earnings quality improvement, breakouts in below-minimum-quality companies have a higher failure rate.
Business quality is at 2.2 out of 10, with near-zero scores on return on equity, gross margins, operating margins, and net margins, and no identified competitive moat, indicating the business is currently generating minimal economic value.
→StableQuality breakdown
- Expectation
- Quality score improves above 4.0 within 12 months as specialty chemicals volumes and pricing recover from a trough.
CounterSpecialty chemicals is a highly cyclical sector where margins can swing dramatically with volume utilization; current near-zero margins may reflect a cyclical trough rather than structural impairment, and recovery can be rapid when volumes improve.
The company missed earnings estimates in 3 of the last 4 quarters with an average negative surprise of -38%, including a -105% miss in February 2026 where actual EPS turned negative, indicating that forecasts remain significantly above what operations can currently deliver.
→StableEarnings
- Expectation
- EPS surprise rises above 0% in at least 2 of the next 4 quarters, confirming that the estimate reset has produced achievable targets.
CounterThe most recent quarter showed a 16.9% positive beat, which may signal the estimate reset is complete and that management has finally guided to a level that operations can achieve.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Stepan Company is a specialty chemicals company trading at a forward price-to-earnings of 13.9x with a PEG of 0.02 and 38% analyst upside, and has broken out above all major moving averages, but business quality is below the minimum threshold at 2.2 out of 10 with 3 consecutive earnings misses, creating a fundamental quality barrier to full conviction.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
2.2/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 0.0 |
| ROA | 1.0 |
| Gross margin | 0.0 |
| Op margin | 1.0 |
| Net margin | 0.0 |
| Current ratio | 4.8 |
| Moat | 3.9 |
| Piotroski F | 6.7 |
- ▸No competitive moat
- ▸Quality concerns
Growth
3.0/10data confidence 33%| Component | Sub-score |
|---|---|
| Rev growth | 3.0 |
Momentum
6.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 0.7 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 8.7 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 32%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
3.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.5 |
| quality rank | 2.2 |
| growth rank | 3.3 |
Technical
2.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.6 |
| support resistance | 0.1 |
| 52w position | 6.9 |
Risk (lower is worse)
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.4 |
| days to cover | 6.7 |
| volatility | 5.1 |
| put call | 3.3 |
| implied vol | 3.0 |
| beta | 7.3 |
| debt equity | 7.4 |
- ▸High IV: 62%
Catalyst
3.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 6.0 |
- ▸Earnings concerns: 1B/3M
- ▸Dividend: 278.0%
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCKPassed (7)
- MOMENTUM:6.9>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:25d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:1.1<1.5@spot
Warning (0)
none
Reward-to-Risk
1.08
Upside
+12.3%
Downside
11.4%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 69, MACD bullish
EdgeInst Constrain — Small cap ($1.3B) below institutional reach
SuitabilityAggressive — MCap $1.3B<$5B
Investment implication
The L1 gate blocked the positive-verdict path: a hard-floor threshold was breached, so dimensional pillars — including Value at 8.6 could not lift the engine output above the verdict floor. Failed gate signal: ASYMMETRY:1.1<1.5@spot.
The strongest dimensions are Value at 8.6, Momentum at 6.9, and Sentiment at 6.2; the weakest are Quality at 2.2, Technical at 2.5, and Growth at 3.0. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of 1.08 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Compelling Value With Analyst Upside
Trip ifAnalyst consensus price target drops below $50, more than 8% below the current $54.47, indicating downward estimate revisions are accelerating.
- P2Technical Breakout Above All Mas
Trip ifPrice falls below $48, more than 12% below the current $54.47, breaking back below major moving averages and invalidating the breakout.
- P3Quality Below Minimum Threshold
Trip ifQuality score remains below 3.0 for more than 4 consecutive quarters, indicating no cyclical recovery in margins is occurring.
- P4Three Consecutive Earnings Misses
Trip ifEPS surprise falls below -30% in at least 2 of the next 4 quarters, indicating the miss streak has continued despite the recent positive beat.