Value
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 4.2 |
| P/S | 8.9 |
| EV/EBITDA | 1.1 |
| Fwd P/E | 6.4 |
| PEG | 10.0 |
| Analyst target | 6.0 |
- ▸Forward P/E: 20.1x
- ▸PEG: 0.36
SGI · Why this verdict
Why Somnigroup International (SGI) 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 score5.9/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company beat earnings estimates in 3 of its last 4 quarters with an average positive surprise of 4.3%, and earnings grew strongly year-over-year, showing the business is improving its financial performance. Catalyst breakdown | Earnings beats continue in at least 2 of the next 3 quarters and year-over-year earnings growth remains positive. | →Stable |
| CounterConsumer discretionary spending on furniture and bedding is highly cyclical; if consumer confidence weakens, demand could deteriorate faster than analysts currently model. | ||
Free cash flow conversion at 122% of net income and a Piotroski F-Score of 7 out of 9 indicate a business that turns accounting earnings into real cash at above-average efficiency, supporting the ability to service the current debt load and invest in growth. Quality breakdown | Free cash flow conversion remains above 100% of net income over the next 12 months as the business maintains its cash generation discipline. | →Stable |
| CounterHigh FCF-to-net-income ratios in consumer durables can reflect deferred capital expenditure rather than true efficiency; if the furniture business requires fleet or facility reinvestment, cash generation could deteriorate. | ||
Debt-to-equity of 2.1 applies a leverage penalty to quality ratings and the stock is recovering from a death-cross technical pattern, with the 200-day moving average declining at 1.4% per month — indicating the business is in a recovery phase with financial risks still elevated. Bear case | The debt-to-equity ratio decreases to below 1.5 over the next 12 months through debt repayment funded by strong free cash flow generation. | →Stable |
| CounterThe MACD is improving and RSI is at 61 with rising OBV, suggesting the worst of the technical deterioration has passed; recovery setups can deliver strong returns once the downtrend inflects. | ||
Analysts carry an average price target 31% above the current price, a strong signal of undervaluation, but 11% short interest indicates a meaningful minority of investors anticipate continued price weakness — a tension that will resolve based on near-term execution. Sentiment breakdown | Short interest falls below 7% of the float within 12 months as the recovery thesis is confirmed by 2 or more consecutive earnings beats. | →Stable |
| Counter31% analyst upside in a consumer cyclical with a declining 200-MA may overestimate recovery speed; analysts frequently carry stale targets that lag fundamental deterioration. | ||
The company beat earnings estimates in 3 of its last 4 quarters with an average positive surprise of 4.3%, and earnings grew strongly year-over-year, showing the business is improving its financial performance.
→StableCatalyst breakdown
- Expectation
- Earnings beats continue in at least 2 of the next 3 quarters and year-over-year earnings growth remains positive.
CounterConsumer discretionary spending on furniture and bedding is highly cyclical; if consumer confidence weakens, demand could deteriorate faster than analysts currently model.
Free cash flow conversion at 122% of net income and a Piotroski F-Score of 7 out of 9 indicate a business that turns accounting earnings into real cash at above-average efficiency, supporting the ability to service the current debt load and invest in growth.
→StableQuality breakdown
- Expectation
- Free cash flow conversion remains above 100% of net income over the next 12 months as the business maintains its cash generation discipline.
CounterHigh FCF-to-net-income ratios in consumer durables can reflect deferred capital expenditure rather than true efficiency; if the furniture business requires fleet or facility reinvestment, cash generation could deteriorate.
Debt-to-equity of 2.1 applies a leverage penalty to quality ratings and the stock is recovering from a death-cross technical pattern, with the 200-day moving average declining at 1.4% per month — indicating the business is in a recovery phase with financial risks still elevated.
→StableBear case
- Expectation
- The debt-to-equity ratio decreases to below 1.5 over the next 12 months through debt repayment funded by strong free cash flow generation.
CounterThe MACD is improving and RSI is at 61 with rising OBV, suggesting the worst of the technical deterioration has passed; recovery setups can deliver strong returns once the downtrend inflects.
Analysts carry an average price target 31% above the current price, a strong signal of undervaluation, but 11% short interest indicates a meaningful minority of investors anticipate continued price weakness — a tension that will resolve based on near-term execution.
→StableSentiment breakdown
- Expectation
- Short interest falls below 7% of the float within 12 months as the recovery thesis is confirmed by 2 or more consecutive earnings beats.
Counter31% analyst upside in a consumer cyclical with a declining 200-MA may overestimate recovery speed; analysts frequently carry stale targets that lag fundamental deterioration.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Somnigroup International is a consumer furnishings business with 122% free cash flow conversion and a 31% analyst upside, recovering from a confirmed downtrend with improving momentum indicators, but high leverage at 2.1x debt-to-equity and 11% short interest temper the near-term bull case.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
5.4/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 5.9 |
| ROA | 3.7 |
| Gross margin | 4.9 |
| Op margin | 4.2 |
| Net margin | 3.4 |
| Current ratio | 3.1 |
| FCF quality | 9.1 |
| Moat | 6.1 |
| Piotroski F | 7.8 |
- ▸Excellent cash conversion: 122% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
7.8/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.6 |
| EPS growth | 10.0 |
Momentum
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.1 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 0.5 |
- ▸Volume accumulation (rising OBV)
- ▸Below 200-MA, MA slope -1.6%/30d — confirmed downtrend
Sentiment
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.9 |
| Price target | 8.1 |
| erm sentiment | 5.0 |
- ▸Light analyst coverage (8.0) — signal dampened
- ▸Analyst upside: 24%
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.0 |
- ▸Negligible insider selling — $445,539 (0.003% of mkt cap)
Peer rank
5.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.1 |
| quality rank | 6.2 |
| growth rank | 7.7 |
Technical
3.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.9 |
| support resistance | 1.0 |
| 52w position | 6.0 |
Risk (lower is worse)
4.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 4.5 |
| days to cover | 4.3 |
| volatility | 3.6 |
| put call | 2.7 |
| implied vol | 4.5 |
| beta | 6.3 |
| debt equity | 2.9 |
- ▸Elevated put/call: 1.60
Catalyst
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 4.6 |
| dividend safety | 5.2 |
- ▸Strong earnings: 3B/0M
- ▸Dividend: 87.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (7)
- MOMENTUM:5.9>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:34d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.5<1.5@spot
Warning (1)
- DEATH_CROSS:momentum=5.9>=5.0 recovering
Reward-to-Risk
0.53
Upside
+7.9%
Downside
14.9%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 69
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The F-path SELL output reflects an overall score of 4.4 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Growth at 7.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.5<1.5@spot) reinforce the read. Current asymmetry R:R is 0.53 — supplementary context, not the trigger for this path.
The strongest dimensions are Growth at 7.8, Sentiment at 7.2, and Value at 6.4; the weakest are Technical at 3.0, Risk (lower is worse) at 4.1, and Insider at 5.0. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 0.53 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Exceptional Cash Conversion Quality
Trip ifFree cash flow conversion falls below 80% of net income for 2 consecutive quarters, indicating deteriorating cash generation efficiency.
- P2Earnings Growth And Beat Streak
Trip ifEarnings surprise falls below 0% in at least 2 of the next 4 quarters, reversing the beat trend.
- P3High Leverage Death Cross Recovery
Trip ifDebt-to-equity ratio rises above 2.5, more than 19% above current levels, indicating leverage is increasing rather than declining.
- P4Analyst Upside Short Interest Tension
Trip ifShort interest rises above 15% of the float and the 200-day moving average continues to decline at a rate greater than 2% per 30 days for more than 60 consecutive days.