Value
5.9/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 5.6 |
| P/S | 9.8 |
| EV/EBITDA | 3.7 |
| Fwd P/E | 6.6 |
| PEG | 4.6 |
- ▸Forward P/E: 19.4x
- ▸PEG: 1.95
CNXN · Why this verdict
Why PC Connection (CNXN) is rated SELL
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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VerdictSELL
Overall score5.4/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
PC Connection is a profitable IT reseller with a strong earnings beat record, a conservative balance sheet and a fresh revenue rebound, but the price of $88.69 is well above the $70.55 analyst target, insiders are selling heavily, and cash conversion is a red flag.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
EPS beat in 3 of the last 4 quarters, with the July 2026 quarter at $1.31 versus a $1.04 estimate, and latest quarterly revenue of $854M is up from $760M a year earlier. Last 4 quarters | EPS should keep beating estimates in the report due in 4 days, and quarterly revenue should reach the $772M next-quarter estimate level or higher. | ↑Improving |
| CounterRevenue was flat around $700M for most of the last two years before the latest jump, and the stock is flagged for revenue declining 9.2% YoY elsewhere in the data, so the rebound may not hold. | ||
The balance sheet is conservative, with debt-to-equity scoring 10.0 and a current ratio score of 9.6, and margins rank best in class among peers. Peer-rank breakdown | Debt-to-equity and current ratio scores should stay near maximum while margins hold. | →Stable |
| CounterGross margin and operating margin components score 0.0 and 2.0, so best-in-class margins are relative to a low-margin distribution industry and give little cushion. | ||
Price of $88.69 is above the $70.55 analyst target (upside of -20.5%), so there is no analyst-supported upside at the current level. Analyst target | Analyst targets should be raised toward the current price, or the price should consolidate back toward the target, over the next 12 months. | →Stable |
| CounterAnalyst targets lag price moves, and a sustained revenue rebound plus continued EPS beats could justify a re-rating that makes today's target look stale. | ||
Insiders sold $13.8M of stock over the last 90 days, 0.62% of market cap, with no insider buying, a pattern rated heavy selling. Insider | Insider selling should taper off, with net selling falling well below 0.3% of market cap, if insiders share management's confidence. | →Stable |
| CounterScheduled or tax-related sales by long-tenured holders are common and often unrelated to the company's outlook, and the stock has run up so sales at higher prices are natural. | ||
Earnings quality is flagged as a red flag, with free cash flow at only 12% of net income, even though the Piotroski F-Score is a strong 7/9. Quality breakdown | Free cash flow should recover toward at least 80% of net income as working capital normalizes. | →Stable |
| CounterA distributor's working capital swings with a large revenue rebound, so low cash conversion may be temporary build-up rather than weak earnings. | ||
EPS beat in 3 of the last 4 quarters, with the July 2026 quarter at $1.31 versus a $1.04 estimate, and latest quarterly revenue of $854M is up from $760M a year earlier.
↑ImprovingLast 4 quarters
- Expectation
- EPS should keep beating estimates in the report due in 4 days, and quarterly revenue should reach the $772M next-quarter estimate level or higher.
CounterRevenue was flat around $700M for most of the last two years before the latest jump, and the stock is flagged for revenue declining 9.2% YoY elsewhere in the data, so the rebound may not hold.
The balance sheet is conservative, with debt-to-equity scoring 10.0 and a current ratio score of 9.6, and margins rank best in class among peers.
→StablePeer-rank breakdown
- Expectation
- Debt-to-equity and current ratio scores should stay near maximum while margins hold.
CounterGross margin and operating margin components score 0.0 and 2.0, so best-in-class margins are relative to a low-margin distribution industry and give little cushion.
Price of $88.69 is above the $70.55 analyst target (upside of -20.5%), so there is no analyst-supported upside at the current level.
→StableAnalyst target
- Expectation
- Analyst targets should be raised toward the current price, or the price should consolidate back toward the target, over the next 12 months.
CounterAnalyst targets lag price moves, and a sustained revenue rebound plus continued EPS beats could justify a re-rating that makes today's target look stale.
Insiders sold $13.8M of stock over the last 90 days, 0.62% of market cap, with no insider buying, a pattern rated heavy selling.
→StableInsider
- Expectation
- Insider selling should taper off, with net selling falling well below 0.3% of market cap, if insiders share management's confidence.
CounterScheduled or tax-related sales by long-tenured holders are common and often unrelated to the company's outlook, and the stock has run up so sales at higher prices are natural.
Earnings quality is flagged as a red flag, with free cash flow at only 12% of net income, even though the Piotroski F-Score is a strong 7/9.
→StableQuality breakdown
- Expectation
- Free cash flow should recover toward at least 80% of net income as working capital normalizes.
CounterA distributor's working capital swings with a large revenue rebound, so low cash conversion may be temporary build-up rather than weak earnings.
Per-dimension breakdown
Quality
4.0/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 3.5 |
| ROA | 3.8 |
| Gross margin | 0.0 |
| Op margin | 2.0 |
| Net margin | 1.6 |
| Current ratio | 9.6 |
| FCF quality | 1.0 |
| Moat | 6.4 |
| Piotroski F | 7.8 |
- ▸Earnings quality RED FLAG: 12% FCF/NI
- ▸Strong Piotroski F-Score: 7/9
Growth
7.3/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.6 |
| EPS growth | 9.0 |
Momentum
4.4/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 7.7 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 6.0 |
| Volume | 7.3 |
- ▸Uptrend pullback (RSI 38) - buy opportunity
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 6.0 |
| Analyst rating | 5.0 |
| Price target | 4.4 |
Insider
3.0/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 2.0 |
| insider conviction | 2.0 |
| holder change | 5.0 |
- ▸Heavy insider selling — $13,786,405 (0.632% of mkt cap)
Peer rank
4.6/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 2.9 |
| quality rank | 5.7 |
| growth rank | 1.4 |
- ▸Best-in-class margins
- ▸Conservative debt levels
Technical
8.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 8.7 |
| support resistance | 8.8 |
| 52w position | 7.9 |
Risk (lower is worse)
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.4 |
| days to cover | 7.1 |
| volatility | 4.8 |
| put call | 0.0 |
| implied vol | 5.4 |
| max pain risk | 5.0 |
| beta | 8.1 |
| debt equity | 10.0 |
- ▸Elevated put/call: 2.33
- ▸Concentration risks: 2 MED (10-K Item 1A)
Catalyst
7.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 10.0 |
| surprise avg | 10.0 |
| dividend safety | 4.8 |
| news activity | 6.0 |
- ▸Perfect beat streak: 4Q
- ▸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_BLOCK:QUALITY_FLOORPassed (4)
- 8K:CLEAN
- EARNINGS_PROXIMITY:NO_DATE
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (3)
- MOMENTUM:4.4<4.5
- ASYMMETRY:-3.0=NEGATIVE
- INSIDER:0.63%=HEAVY
Warning (0)
none
Reward-to-Risk
-2.99
Upside
-18.4%
Downside
6.2%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — MCap $2.2B<$5B
Investment implication
The SELL_IF_HOLDING verdict reflects the MOMENTUM gate's 4.4<4.5 outcome against Technical at 8.5 and asymmetric R:R of -2.99.
The strongest dimensions are Technical at 8.5, Growth at 7.3, and Catalyst at 7.2; the weakest are Insider at 3.0, Quality at 4.0, and Momentum at 4.4. The V9 engine flagged 3 failed gates, producing an asymmetric reward-to-risk of -2.99 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Analyst Target Already Exceeded
Trip ifAnalyst target rises above $93, giving more than 5% upside from the current $88.69.
- P2Heavy Insider Selling
Trip ifNet insider selling over 90 days falls below 0.3% of market cap from the current 0.62%.
- P3Weak Cash Conversion Red Flag
Trip ifFree cash flow rises above 80% of net income from the current 12%.
- P4Earnings Beats And Revenue Rebound
Trip ifEPS surprise stays below 0% for 2 consecutive quarters.
- P5Conservative Balance Sheet Strong Margins
Trip ifDebt-to-equity score falls below 6.0 from the current 10.0.