Value
2.3/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 3.2 |
| P/S | 0.0 |
| EV/EBITDA | 0.0 |
| Fwd P/E | 3.0 |
| PEG | 3.2 |
- ▸Forward P/E: 35.1x
- ▸PEG: 3.81
- ▸Expensive valuation
WINA · Why this verdict
Why Winmark (WINA) 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 score4.6/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Winmark has missed earnings estimates in all 3 of the last 3 reported quarters, with an average negative surprise of -5.6% — an unusual pattern for a company of this quality that raises questions about whether the franchise model is facing structural headwinds in consumer spending on resale goods. Earnings | Earnings beat rate recovers to at least 2 of the next 3 quarters, with positive surprise percentages averaging above 0%, ending the miss streak. | →Stable |
| CounterThe miss magnitude of -7.4%, -3.2%, and -6.2% is relatively modest; this is not catastrophic earnings deterioration but rather slight underperformance against tight consensus estimates, which could reverse with even modest top-line recovery. | ||
Winmark's operating margin of 48% is exceptional among specialty retailers and earns the best-in-class margins designation within its peer group — indicating a highly efficient franchise model with strong pricing power and low overhead relative to revenue. Quality breakdown | Operating margin remains above 40% for at least 2 consecutive reported annual periods, confirming the margin profile is durable rather than a temporary high-water mark. | →Stable |
| CounterWith revenue declining 5% year-over-year, maintaining 48% margins on a shrinking top line may not be sustainable; if the revenue decline accelerates, fixed costs could compress margins faster than the market currently expects. | ||
At a forward price-to-earnings ratio of 33.3x and PEG of 3.69, Winmark is priced for growth that is not materializing — revenue declined 5% year-over-year and a PEG above 3 suggests the stock is expensive relative to its near-term growth rate. Valuation breakdown | Forward price-to-earnings multiple contracts below 25x as either earnings improve or the stock price adjusts, restoring a PEG ratio below 2.5 within 12 months. | →Stable |
| CounterHigh-quality franchise businesses with 48% margins and near-zero capital requirements deserve premium multiples; the 33.3x forward multiple reflects the durability of the business model rather than speculative growth premium. | ||
A Piotroski F-score of 8 out of 9 indicates strong and improving financial health across profitability, leverage, and operating efficiency metrics — a signal that despite the revenue softness, the business's financial foundation remains robust. Quality breakdown | Piotroski score remains at 7 or higher for the next 2 annual reporting periods, and free cash flow as a percentage of net income stays above 50%. | →Stable |
| CounterPiotroski scores in small franchise businesses can be distorted by very stable, non-cyclical financial metrics that mask deteriorating unit-level economics; the score may not capture underlying system growth slowdown. | ||
Winmark has missed earnings estimates in all 3 of the last 3 reported quarters, with an average negative surprise of -5.6% — an unusual pattern for a company of this quality that raises questions about whether the franchise model is facing structural headwinds in consumer spending on resale goods.
→StableEarnings
- Expectation
- Earnings beat rate recovers to at least 2 of the next 3 quarters, with positive surprise percentages averaging above 0%, ending the miss streak.
CounterThe miss magnitude of -7.4%, -3.2%, and -6.2% is relatively modest; this is not catastrophic earnings deterioration but rather slight underperformance against tight consensus estimates, which could reverse with even modest top-line recovery.
Winmark's operating margin of 48% is exceptional among specialty retailers and earns the best-in-class margins designation within its peer group — indicating a highly efficient franchise model with strong pricing power and low overhead relative to revenue.
→StableQuality breakdown
- Expectation
- Operating margin remains above 40% for at least 2 consecutive reported annual periods, confirming the margin profile is durable rather than a temporary high-water mark.
CounterWith revenue declining 5% year-over-year, maintaining 48% margins on a shrinking top line may not be sustainable; if the revenue decline accelerates, fixed costs could compress margins faster than the market currently expects.
At a forward price-to-earnings ratio of 33.3x and PEG of 3.69, Winmark is priced for growth that is not materializing — revenue declined 5% year-over-year and a PEG above 3 suggests the stock is expensive relative to its near-term growth rate.
→StableValuation breakdown
- Expectation
- Forward price-to-earnings multiple contracts below 25x as either earnings improve or the stock price adjusts, restoring a PEG ratio below 2.5 within 12 months.
CounterHigh-quality franchise businesses with 48% margins and near-zero capital requirements deserve premium multiples; the 33.3x forward multiple reflects the durability of the business model rather than speculative growth premium.
A Piotroski F-score of 8 out of 9 indicates strong and improving financial health across profitability, leverage, and operating efficiency metrics — a signal that despite the revenue softness, the business's financial foundation remains robust.
→StableQuality breakdown
- Expectation
- Piotroski score remains at 7 or higher for the next 2 annual reporting periods, and free cash flow as a percentage of net income stays above 50%.
CounterPiotroski scores in small franchise businesses can be distorted by very stable, non-cyclical financial metrics that mask deteriorating unit-level economics; the score may not capture underlying system growth slowdown.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Winmark Corporation is a best-in-class specialty retailer with 48% operating margins, a Piotroski score of 8 out of 9, and best-in-class peer quality rankings — but 3 consecutive earnings misses, a rich valuation at a forward price-to-earnings of 33.3x, and revenue declining 5% year-over-year create a tension between exceptional quality and near-term execution concerns.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
8.3/10data confidence 100%| Component | Sub-score |
|---|---|
| ROA | 10.0 |
| Gross margin | 10.0 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 9.2 |
| FCF quality | 6.1 |
| Moat | 5.2 |
| Rule of 40 | 5.5 |
| Piotroski F | 8.9 |
- ▸Strong margins: 48%
- ▸No competitive moat
- ▸Strong Piotroski F-Score: 8/9
- ▸High-quality business
Growth
2.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 1.3 |
| EPS growth | 3.8 |
- ▸Declining revenue: -5%
Momentum
5.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 10.0 |
| OBV | 1.0 |
| MA position | 8.0 |
| Volume | 2.1 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-MA but MA slope flat
Sentiment
6.1/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 8.5 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 28%
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
3.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 0.7 |
| quality rank | 9.6 |
| growth rank | 0.4 |
- ▸Best-in-class margins
Technical
3.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 2.0 |
| support resistance | 1.9 |
| 52w position | 6.6 |
Risk (lower is worse)
5.0/10data confidence 80%| Component | Sub-score |
|---|---|
| short interest | 3.7 |
| days to cover | 2.8 |
| volatility | 3.4 |
| beta | 10.0 |
Catalyst
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 6.5 |
- ▸Earnings concerns: 0B/3M
- ▸Earnings in 9 days
- ▸Dividend: 96.0%
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (6)
- MOMENTUM:5.2>=4.5
- INSIDER:OK
- DEATH_CROSS:QUALITY_MOMENTUM_EXEMPT
- NEWS_EVENTS:NONE_RECENT
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.7<1.5@spot
Warning (4)
- MOMENTUM:5.2<5.5 (soft — BUY_NOW allowed but watch)
- DEATH_CROSS:quality=8.3>=7.5+momentum=5.2>=5.0 exempted
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
- EARNINGS_PROXIMITY:9d<=14d (soft)
Reward-to-Risk
0.67
Upside
+9.2%
Downside
13.6%
Sizing output
AVOID
SetupMomentum Cont — Trend continuation, RSI 67, MACD bullish
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $1.5B<$5B
Investment implication
The F-path SELL output reflects an overall score of 4.6 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Quality at 8.3) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( ASYMMETRY:0.7<1.5@spot) reinforce the read. Current asymmetry R:R is 0.67 — supplementary context, not the trigger for this path.
The strongest dimensions are Quality at 8.3, Sentiment at 6.1, and Momentum at 5.2; the weakest are Value at 2.3, Growth at 2.5, and Catalyst at 3.3. The V9 engine flagged 1 failed gate with 4 warnings, producing an asymmetric reward-to-risk of 0.67 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Best In Class Operating Margins
Trip ifOperating margin falls below 35% for at least 2 consecutive reported annual periods.
- P2Three Consecutive Earnings Misses
Trip ifEarnings miss rate remains at 3 or more of the next 4 quarters, with at least 1 miss exceeding -10% surprise.
- P3Rich Valuation Declining Revenue
Trip ifForward price-to-earnings rises above 38x on flat or declining earnings, indicating further valuation expansion without fundamental support.
- P4High Piotroski Durable Financials
Trip ifPiotroski score falls below 6 or free cash flow drops below 30% of net income for at least 2 consecutive reported periods.