Value
8.1/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.2 |
| P/S | 9.6 |
| EV/EBITDA | 6.4 |
| Fwd P/E | 9.0 |
| PEG | 8.5 |
| Analyst target | 7.5 |
- ▸Forward P/E: 12.1x
- ▸PEG: 0.76
- ▸Attractively valued
ALG · Why this verdict
Why Alamo Group (ALG) is rated BUY WAIT
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results. How we score · Editorial policy
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VerdictBUY WAIT
Overall score5.2/10
ConfidenceMEDIUM
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Alamo Group screens attractively valued at a forward price-to-earnings of 12.6 times with 20% analyst upside — but three consecutive earnings misses before the most recent beat, a confirmed price downtrend, and a free-cash-flow conversion warning at 57% of net income create a setup that favors waiting for evidence of execution improvement before initiating.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
At a forward price-to-earnings of 12.6 times and a PEG ratio of 0.91, the stock screens as attractively valued relative to peers — a factor that limits downside even as earnings execution has been inconsistent. Valuation breakdown | The forward multiple expanding to 15 times as earnings delivery improves and analyst estimates stabilize would signal the valuation discount is closing. | ↑Improving |
| CounterA low multiple can reflect a value trap if underlying earnings power is declining; three consecutive misses before the recent beat suggest the bar has been repeatedly set too high, and the earnings quality warning on cash conversion adds uncertainty about whether reported earnings overstate true profitability. | ||
The stock is in a confirmed downtrend — trading below its 200-day moving average with the long-term average declining at 5.2% over 30 days and on-balance volume falling — technical conditions that create resistance to price recovery even when fundamental catalysts emerge. Momentum breakdown | Price closing above the 200-day moving average and sustaining that level for more than 15 consecutive trading days would signal the downtrend has reversed. | ↓Deteriorating |
| CounterThe MACD is improving despite the death cross and RSI is at 49, suggesting early-stage stabilization rather than continued steep decline — the technical picture may be worse than the underlying business momentum implies. | ||
The three quarters prior to the most recent beat produced earnings misses averaging more than 14% below consensus — a streak that suggests either management's guidance framework has been set too high or underlying demand trends are softer than the market expects. Earnings | Two consecutive positive EPS surprises above 5% would indicate the execution gap has closed and guidance calibration has reset to a deliverable level. | ↑Improving |
| CounterThe most recent quarter produced a 16% positive surprise, which may mark the start of a guidance reset cycle where the bar has been sufficiently lowered for the business to over-deliver going forward. | ||
Free cash flow converts at only 57% of net income — an earnings quality warning suggesting reported earnings may overstate the cash the business is actually generating, which complicates valuation and raises questions about dividend sustainability. Quality breakdown | Free-cash-flow-to-net-income ratio rising above 80% for two consecutive quarters would confirm improving cash conversion and reduce uncertainty around the quality of reported earnings. | →Stable |
| CounterA Piotroski F-Score of 7 out of 9 reflects solid balance sheet health overall; the FCF shortfall relative to net income may reflect a temporary capital spending cycle rather than structural earnings inflation. | ||
At a forward price-to-earnings of 12.6 times and a PEG ratio of 0.91, the stock screens as attractively valued relative to peers — a factor that limits downside even as earnings execution has been inconsistent.
↑ImprovingValuation breakdown
- Expectation
- The forward multiple expanding to 15 times as earnings delivery improves and analyst estimates stabilize would signal the valuation discount is closing.
CounterA low multiple can reflect a value trap if underlying earnings power is declining; three consecutive misses before the recent beat suggest the bar has been repeatedly set too high, and the earnings quality warning on cash conversion adds uncertainty about whether reported earnings overstate true profitability.
The stock is in a confirmed downtrend — trading below its 200-day moving average with the long-term average declining at 5.2% over 30 days and on-balance volume falling — technical conditions that create resistance to price recovery even when fundamental catalysts emerge.
↓DeterioratingMomentum breakdown
- Expectation
- Price closing above the 200-day moving average and sustaining that level for more than 15 consecutive trading days would signal the downtrend has reversed.
CounterThe MACD is improving despite the death cross and RSI is at 49, suggesting early-stage stabilization rather than continued steep decline — the technical picture may be worse than the underlying business momentum implies.
The three quarters prior to the most recent beat produced earnings misses averaging more than 14% below consensus — a streak that suggests either management's guidance framework has been set too high or underlying demand trends are softer than the market expects.
↑ImprovingEarnings
- Expectation
- Two consecutive positive EPS surprises above 5% would indicate the execution gap has closed and guidance calibration has reset to a deliverable level.
CounterThe most recent quarter produced a 16% positive surprise, which may mark the start of a guidance reset cycle where the bar has been sufficiently lowered for the business to over-deliver going forward.
Free cash flow converts at only 57% of net income — an earnings quality warning suggesting reported earnings may overstate the cash the business is actually generating, which complicates valuation and raises questions about dividend sustainability.
→StableQuality breakdown
- Expectation
- Free-cash-flow-to-net-income ratio rising above 80% for two consecutive quarters would confirm improving cash conversion and reduce uncertainty around the quality of reported earnings.
CounterA Piotroski F-Score of 7 out of 9 reflects solid balance sheet health overall; the FCF shortfall relative to net income may reflect a temporary capital spending cycle rather than structural earnings inflation.
Per-dimension breakdown
Quality
4.8/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.9 |
| ROA | 3.8 |
| Gross margin | 0.8 |
| Op margin | 4.1 |
| Net margin | 3.0 |
| Current ratio | 8.6 |
| FCF quality | 6.5 |
| Moat | 5.8 |
| Piotroski F | 7.8 |
- ▸Strong Piotroski F-Score: 7/9
Growth
3.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 4.4 |
| EPS growth | 1.8 |
Momentum
1.7/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 3.5 |
| MACD | 0.0 |
| OBV | 1.2 |
| MA position | 1.0 |
| Volume | 2.9 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -1.6%/30d — confirmed downtrend
Sentiment
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.5 |
| Analyst rating | 6.3 |
| Price target | 9.1 |
- ▸Light analyst coverage (4.0) — signal dampened
- ▸Analyst upside: 39%
Insider
4.1/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 4.5 |
| insider conviction | 2.0 |
| holder change | 5.7 |
- ▸Modest insider selling — $889,531 (0.050% of mkt cap)
Peer rank
6.1/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.3 |
| quality rank | 5.6 |
| growth rank | 4.4 |
- ▸Conservative debt levels
Technical
6.3/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 7.2 |
| support resistance | 8.2 |
| 52w position | 3.4 |
Risk (lower is worse)
7.7/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.0 |
| days to cover | 8.2 |
| volatility | 6.5 |
| put call | 10.0 |
| implied vol | 6.4 |
| beta | 6.7 |
| debt equity | 9.1 |
Catalyst
4.7/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 0.2 |
| dividend safety | 8.5 |
| news activity | 6.0 |
- ▸Earnings concerns: 2B/2M
- ▸Earnings in 3 days
- ▸Dividend aristocrat: 0.9% yield
How the verdict was assembled
Engine trigger
Earnings in 3 days. Wait until post-earnings.
Engine technical detail
verdict_path:
L3:NEWS_BLOCK|ENTRY_STICKY:WITHIN_BANDPassed (4)
- ASYMMETRY:3.6>=1.5
- INSIDER:OK
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (3)
- MOMENTUM:1.7<4.5
- DEATH_CROSS:HARD_BLOCK
- EARNINGS_PROXIMITY:3d<=7d
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
3.58
Upside
+17.9%
Downside
5.0%
Sizing output
STARTER
SetupFalling Knife — Death cross, below all MAs, RSI 36, MACD bearish
EdgeInst Constrain — Small cap ($1.8B) below institutional reach
SuitabilityAggressive — MCap $1.8B<$5B
Investment implication
A recent news event triggered an L3 news-block on the verdict path. Trigger: Earnings in 3 days. Wait until post-earnings. The 10-dimension scores remain Value at 8.1 (strongest), but MOMENTUM:1.7<4.5 also fails — the news block is the proximate trigger, not the sole driver.
The strongest dimensions are Value at 8.1, Risk (lower is worse) at 7.7, and Sentiment at 7.2; the weakest are Momentum at 1.7, Growth at 3.1, and Insider at 4.1. The V9 engine flagged 3 failed gates with 1 warning, producing an asymmetric reward-to-risk of 3.58 and an engine sizing output of STARTER.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Attractive Valuation Provides Downside Floor
Trip ifForward P/E re-rates above 18 times, signaling the market believes the valuation discount has fully closed.
- P2Death Cross Confirmed Downtrend
Trip ifStock closes above the 200-day moving average and sustains the level for more than 15 consecutive trading days.
- P3Three Consecutive Earnings Misses
Trip ifEPS surprise exceeds 5% for 2 consecutive quarters.
- P4Earnings Quality Warning Fcf Conversion
Trip ifFree-cash-flow-to-net-income ratio rises above 90% for 2 consecutive quarters.