Value
7.3/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 5.1 |
| P/S | 8.4 |
| EV/EBITDA | 5.0 |
| Fwd P/E | 9.1 |
| PEG | 10.0 |
| Analyst target | 5.0 |
- ▸Forward P/E: 11.3x
- ▸PEG: 0.10
- ▸Attractively valued
SPSC · Why this verdict
Why SPS Commerce (SPSC) is rated HOLD
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictHOLD
Overall score5.9/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The bear case identifies product concentration risk in cloud-based supply chain management as the primary structural concern — all revenue is derived from a single category of software product, making the business vulnerable to competitive displacement or market saturation in that niche. Bear case | Revenue from supply chain management software grows at least 8% year-over-year in the next two annual reporting periods, demonstrating that the market remains expansive and that new customer additions are offsetting any churn in the existing base. | →Stable |
| CounterSupply chain management software is increasingly commoditized as ERP giants including SAP and Oracle invest heavily in this category; SPS Commerce's moat score of 6.5 out of 10 (not wide) suggests the competitive position may erode faster than the financial results currently indicate. | ||
SPS Commerce has beaten analyst earnings estimates in all 4 of the last reported quarters, with an average positive surprise of 14.9% across beats of 12.5%, 23.6%, 13.3%, and 10.4%, demonstrating exceptionally consistent and reliable execution for a small-cap software business. Earnings | Earnings beats continue in at least 3 of the next 4 quarters with average surprise above 8%, sustaining the pattern of steady outperformance that has characterized recent quarters. | →Stable |
| CounterThe consistency of the beats (all in the 10-24% range) could indicate conservative guidance management rather than genuine business acceleration; revenue is likely growing modestly, and the cloud-based supply chain niche may be approaching market saturation in its current form. | ||
Free cash flow equals 167% of net income, and the Piotroski financial strength score is 9 out of 9 — the maximum possible — confirming that the business has broad balance sheet and cash generation health across all nine criteria simultaneously. Quality breakdown | Free cash flow remains above 120% of net income for each of the next 4 reported quarters, confirming that the cash generation advantage is a sustainable structural feature rather than a one-period anomaly. | →Stable |
| CounterDespite strong cash conversion, the overall quality score is 6.8 out of 10 rather than top-tier, the return on equity is a modest 3.2 out of 10 in component scores, and the Rule of 40 metric of approximately 5.5 suggests the combination of growth plus margins is below what investors in high-quality software companies typically demand. | ||
A confirmed death cross is in place with the 200-day moving average declining at -11.1% per month — one of the steepest downtrend slopes in the entire screened universe — and falling on-balance volume confirms institutional distribution is ongoing despite the strong fundamental track record. Momentum breakdown | The 200-day moving average slope flattens to less than -5% per month within 3 months and the moving average convergence-divergence sustains its current positive reading, indicating that the downtrend is beginning to decelerate. | →Stable |
| CounterA -11.1% monthly slope on the 200-day moving average is an extremely severe downtrend that typically requires 6 to 12 months to fully reverse; the recovery setup pattern noted in the technical analysis may be premature and the stock could revisit new lows before stabilizing. | ||
The bear case identifies product concentration risk in cloud-based supply chain management as the primary structural concern — all revenue is derived from a single category of software product, making the business vulnerable to competitive displacement or market saturation in that niche.
→StableBear case
- Expectation
- Revenue from supply chain management software grows at least 8% year-over-year in the next two annual reporting periods, demonstrating that the market remains expansive and that new customer additions are offsetting any churn in the existing base.
CounterSupply chain management software is increasingly commoditized as ERP giants including SAP and Oracle invest heavily in this category; SPS Commerce's moat score of 6.5 out of 10 (not wide) suggests the competitive position may erode faster than the financial results currently indicate.
SPS Commerce has beaten analyst earnings estimates in all 4 of the last reported quarters, with an average positive surprise of 14.9% across beats of 12.5%, 23.6%, 13.3%, and 10.4%, demonstrating exceptionally consistent and reliable execution for a small-cap software business.
→StableEarnings
- Expectation
- Earnings beats continue in at least 3 of the next 4 quarters with average surprise above 8%, sustaining the pattern of steady outperformance that has characterized recent quarters.
CounterThe consistency of the beats (all in the 10-24% range) could indicate conservative guidance management rather than genuine business acceleration; revenue is likely growing modestly, and the cloud-based supply chain niche may be approaching market saturation in its current form.
Free cash flow equals 167% of net income, and the Piotroski financial strength score is 9 out of 9 — the maximum possible — confirming that the business has broad balance sheet and cash generation health across all nine criteria simultaneously.
→StableQuality breakdown
- Expectation
- Free cash flow remains above 120% of net income for each of the next 4 reported quarters, confirming that the cash generation advantage is a sustainable structural feature rather than a one-period anomaly.
CounterDespite strong cash conversion, the overall quality score is 6.8 out of 10 rather than top-tier, the return on equity is a modest 3.2 out of 10 in component scores, and the Rule of 40 metric of approximately 5.5 suggests the combination of growth plus margins is below what investors in high-quality software companies typically demand.
A confirmed death cross is in place with the 200-day moving average declining at -11.1% per month — one of the steepest downtrend slopes in the entire screened universe — and falling on-balance volume confirms institutional distribution is ongoing despite the strong fundamental track record.
→StableMomentum breakdown
- Expectation
- The 200-day moving average slope flattens to less than -5% per month within 3 months and the moving average convergence-divergence sustains its current positive reading, indicating that the downtrend is beginning to decelerate.
CounterA -11.1% monthly slope on the 200-day moving average is an extremely severe downtrend that typically requires 6 to 12 months to fully reverse; the recovery setup pattern noted in the technical analysis may be premature and the stock could revisit new lows before stabilizing.
TrendMatrix Research · core thesis
Engine thesis — one sentence
SPS Commerce has delivered 4 consecutive earnings beats with an average surprise of nearly 15%, exceptional free cash flow at 167% of net income, and a perfect Piotroski score of 9 out of 9, but the stock is in a confirmed death-cross downtrend with the 200-day moving average declining at -11.1% per month and asymmetry is unfavorable at current prices.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.2 |
| ROA | 4.3 |
| Gross margin | 9.9 |
| Op margin | 5.1 |
| Net margin | 6.0 |
| Current ratio | 7.4 |
| FCF quality | 10.0 |
| Moat | 6.5 |
| Rule of 40 | 5.5 |
| Piotroski F | 10.0 |
- ▸Excellent cash conversion: 167% FCF/NI
- ▸Strong Piotroski F-Score: 9/9
Growth
7.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 3.9 |
| EPS growth | 10.0 |
Momentum
4.1/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.3 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 6.0 |
| Volume | 0.0 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -9.9%/30d — confirmed downtrend
Sentiment
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.5 |
| Analyst rating | 5.0 |
| Price target | 7.1 |
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.1 |
- ▸Insider selling (low materiality) — $114,930 (0.005% of mkt cap)
Peer rank
5.2/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.9 |
| quality rank | 5.5 |
| growth rank | 1.8 |
Technical
0.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 0.1 |
| support resistance | 2.4 |
| 52w position | 0.0 |
Risk (lower is worse)
5.6/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 4.6 |
| days to cover | 4.8 |
| volatility | 0.8 |
| put call | 10.0 |
| implied vol | 2.4 |
| beta | 9.6 |
| debt equity | 6.9 |
- ▸High IV: 66%
- ▸Concentration risks: 1 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| earnings timing | 5.0 |
| surprise avg | 8.7 |
| news activity | 5.0 |
- ▸Perfect beat streak: 4Q
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more.
Engine technical detail
verdict_path:
L4:PATH_F_HOLDPassed (5)
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:34d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (3)
- MOMENTUM:4.1<4.5
- ASYMMETRY:0.0<1.5@spot
- DEATH_CROSS:HARD_BLOCK
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.02
Upside
+0.3%
Downside
13.2%
Sizing output
AVOID
SetupRecovery — Death cross but MACD improving, RSI 67
EdgeNo clear edge — No clear edge identified
SuitabilitySpeculative — Drawdown -60% (>40% off 52w high)
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: INSIDER:OK. Top dim: Value at 7.3; weakest: Technical at 0.8. No conviction either direction.
The strongest dimensions are Value at 7.3, Growth at 7.0, and Quality at 6.8; the weakest are Technical at 0.8, Momentum at 4.1, and Insider at 5.0. The V9 engine flagged 3 failed gates with 1 warning, producing an asymmetric reward-to-risk of 0.02 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Four Quarter Earnings Beat Consistency
Trip ifEarnings surprise falls below 0% in at least 2 of the next 4 quarters, indicating the consistent execution pattern has broken down.
- P2Exceptional Cash Conversion Piotroski
Trip ifFree cash flow falls below 100% of net income for 2 consecutive quarters, indicating the exceptional cash conversion advantage is eroding.
- P3Death Cross Steep Downtrend
Trip if200-day moving average slope declines by more than 13% per month for 2 consecutive months, indicating the downtrend is accelerating rather than decelerating.
- P4Product Concentration Single Vertical
Trip ifRevenue growth rate falls below 5% year-over-year in any single reported quarter, indicating the supply chain software market is slowing materially below current growth expectations.