Value
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.3 |
| P/S | 10.0 |
| EV/EBITDA | 5.5 |
| Fwd P/E | 5.9 |
| PEG | 10.0 |
| Analyst target | 4.0 |
- ▸Forward P/E: 21.7x
- ▸PEG: 0.16
- ▸Attractively valued
SUN · Why this verdict
Why Sunoco (SUN) 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 score6.1/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Reported earnings grew 106% year-over-year, yet free cash flow is only 12% of net income, indicating a severe divergence between accounting earnings and actual cash generation that undermines the apparent growth story. Quality breakdown | Free cash flow as a percentage of net income improves to above 50% within 12 months, narrowing the gap between reported and cash earnings. | →Stable |
| CounterPartnership distributions and refining working capital timing in an MLP structure can temporarily depress FCF relative to net income without reflecting underlying economic weakness in the business. | ||
Refined motor fuels account for 92% of product revenues, creating extreme product concentration that exposes the partnership to gasoline demand trends, renewable fuel competition, and petroleum price volatility with minimal diversification. Bear case | Non-motor-fuel revenues grow to represent more than 12% of the product mix within 12 months, reducing the 92% concentration meaningfully. | →Stable |
| CounterFuel distribution partnerships are inherently fuel-focused and derive value from network density and customer contracts rather than product diversification; the concentration is structural and priced into the valuation. | ||
Revenue declined 43.1% year-over-year with operating margin compression of 8.7 percentage points, both qualifying as value-trap warning signals that suggest the growth in earnings may be driven by financial engineering rather than operational improvement. Warnings | Revenue stabilizes or grows by at least 5% year-over-year within 12 months, reversing the current 43% decline trajectory. | →Stable |
| CounterLarge revenue declines in a fuel distributor that acquires or divests assets can reflect portfolio changes rather than demand deterioration; the 106% earnings growth suggests profitability improved even as revenue fell. | ||
Sunoco missed earnings estimates in 3 of the last 4 quarters, with average surprises of negative 94%, negative 52%, and negative 76% in three consecutive periods before the most recent beat, indicating significant difficulty in delivering predictable results. Earnings | The company beats earnings estimates in at least 2 of the next 3 quarters, demonstrating that the single recent beat is the start of a more consistent pattern rather than an anomaly. | →Stable |
| CounterThe most recent quarter delivered a 65.6% positive surprise of $2.85 versus $1.72 estimated, which may signal that the company has turned a corner operationally after the three-quarter miss streak. | ||
Reported earnings grew 106% year-over-year, yet free cash flow is only 12% of net income, indicating a severe divergence between accounting earnings and actual cash generation that undermines the apparent growth story.
→StableQuality breakdown
- Expectation
- Free cash flow as a percentage of net income improves to above 50% within 12 months, narrowing the gap between reported and cash earnings.
CounterPartnership distributions and refining working capital timing in an MLP structure can temporarily depress FCF relative to net income without reflecting underlying economic weakness in the business.
Refined motor fuels account for 92% of product revenues, creating extreme product concentration that exposes the partnership to gasoline demand trends, renewable fuel competition, and petroleum price volatility with minimal diversification.
→StableBear case
- Expectation
- Non-motor-fuel revenues grow to represent more than 12% of the product mix within 12 months, reducing the 92% concentration meaningfully.
CounterFuel distribution partnerships are inherently fuel-focused and derive value from network density and customer contracts rather than product diversification; the concentration is structural and priced into the valuation.
Revenue declined 43.1% year-over-year with operating margin compression of 8.7 percentage points, both qualifying as value-trap warning signals that suggest the growth in earnings may be driven by financial engineering rather than operational improvement.
→StableWarnings
- Expectation
- Revenue stabilizes or grows by at least 5% year-over-year within 12 months, reversing the current 43% decline trajectory.
CounterLarge revenue declines in a fuel distributor that acquires or divests assets can reflect portfolio changes rather than demand deterioration; the 106% earnings growth suggests profitability improved even as revenue fell.
Sunoco missed earnings estimates in 3 of the last 4 quarters, with average surprises of negative 94%, negative 52%, and negative 76% in three consecutive periods before the most recent beat, indicating significant difficulty in delivering predictable results.
→StableEarnings
- Expectation
- The company beats earnings estimates in at least 2 of the next 3 quarters, demonstrating that the single recent beat is the start of a more consistent pattern rather than an anomaly.
CounterThe most recent quarter delivered a 65.6% positive surprise of $2.85 versus $1.72 estimated, which may signal that the company has turned a corner operationally after the three-quarter miss streak.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Sunoco LP reported 106% year-over-year earnings growth and beat earnings estimates in 1 of the last 4 quarters, but quality is below the minimum threshold with a 12% free cash flow conversion rate and value-trap signals including 43% revenue decline and margin compression, limiting the investment case.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
3.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 5.1 |
| ROA | 2.9 |
| Gross margin | 0.0 |
| Op margin | 3.2 |
| Net margin | 1.6 |
| Current ratio | 5.2 |
| FCF quality | 1.0 |
| Moat | 5.4 |
| Piotroski F | 6.7 |
- ▸Earnings quality RED FLAG: 12% FCF/NI
- ▸No competitive moat
Growth
10.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 10.0 |
| EPS growth | 10.0 |
- ▸Strong growth: 106% YoY
Momentum
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 0.0 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.6/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 7.9 |
| Price target | 6.3 |
| erm sentiment | 5.0 |
- ▸Light analyst coverage (8.0) — signal dampened
Insider
5.0/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 5.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
5.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 3.2 |
| quality rank | 6.1 |
| growth rank | 9.4 |
- ▸Industry growth leader
Technical
3.6/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 1.1 |
| support resistance | 1.1 |
| 52w position | 8.7 |
Risk (lower is worse)
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 8.6 |
| days to cover | 5.3 |
| volatility | 3.9 |
| put call | 0.0 |
| implied vol | 6.3 |
| beta | 10.0 |
| debt equity | 3.3 |
- ▸Elevated put/call: 8.06
- ▸Concentration risks: 1 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
2.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 3.5 |
- ▸Earnings concerns: 1B/3M
- ▸Yield trap warning: high yield but unsafe
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCKPassed (7)
- MOMENTUM:6.8>=5.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:31d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:-0.5=NEGATIVE
Warning (0)
none
Reward-to-Risk
-0.51
Upside
-5.2%
Downside
10.3%
Sizing output
AVOID
SetupBreakout — Golden cross, above all MAs, RSI 61, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityModerate — Balanced profile
Investment implication
The L1 gate blocked the positive-verdict path: a hard-floor threshold was breached, so dimensional pillars — including Growth at 10.0 could not lift the engine output above the verdict floor. Failed gate signal: ASYMMETRY:-0.5=NEGATIVE.
The strongest dimensions are Growth at 10.0, Value at 7.0, and Momentum at 6.8; the weakest are Catalyst at 2.7, Quality at 3.5, and Technical at 3.6. The V9 engine flagged 1 failed gate, producing an asymmetric reward-to-risk of -0.51 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Earnings Growth Vs Fcf Gap
Trip ifFree cash flow falls below 5% of net income, declining more than 7 percentage points from the current 12% level.
- P2Refined Fuels Concentration Risk
Trip ifRefined motor fuels rise above 95% of total product revenues, increasing the already extreme 92% concentration further.
- P3Revenue Decline Margin Compression
Trip ifRevenue declines by more than 50% year-over-year in any single quarter, exceeding the current 43% decline rate.
- P4Inconsistent Earnings Pattern
Trip ifEPS surprise falls below 0% in at least 3 of the next 4 quarters, returning to the prior miss pattern.