Value
6.8/10data confidence 83%| Component | Sub-score |
|---|---|
| P/S | 9.2 |
| EV/EBITDA | 3.4 |
| Fwd P/E | 8.2 |
| PEG | 10.0 |
| Analyst target | 3.0 |
- ▸Forward P/E: 14.3x
- ▸PEG: 0.05
CRNC · Why this verdict
Why Cerence (CRNC) 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 score5.1/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Cerence trades at a rock-bottom PEG ratio of 0.05 and a forward P/E of 14.0x, screening as statistically cheap relative to its growth profile. Valuation breakdown | The PEG ratio stays below 0.5 and forward P/E remains below 20x over the next 12 months if the cheap valuation is sustained rather than a value trap. | →Stable |
| CounterA PEG this low often reflects deteriorating fundamentals rather than a bargain — Cerence's revenue is declining 18% YoY, meaning the 'E' in PEG may be unreliable. | ||
Cerence fails the Rule of 40 threshold with a score of only 3, and carries no competitive moat, despite being FCF-positive with a 20% FCF margin. Quality breakdown | The Rule of 40 score improves above 20 within 12 months as either revenue growth or FCF margin improves. | →Stable |
| CounterAn 18% revenue decline means the FCF margin could be a product of cost-cutting rather than durable profitability, and the failing Rule of 40 score confirms fundamental weakness. | ||
Cerence has beaten consensus EPS in 3 of the last 4 quarters with an average surprise of 66.6%, suggesting analyst estimates have been persistently too conservative. Earnings | The beat streak continues into the next print, extending to 4 of 5 quarters. | →Stable |
| CounterA 14.7% theoretical downside per the target-reached signal suggests the market has already priced in continued beats, leaving little room for further re-rating. | ||
The engine's asymmetry ratio is negative at -1.05, meaning downside risk (14.0%) exceeds upside potential, a structurally poor risk/reward setup. Reward-to-risk math | The asymmetry ratio should turn positive (upside exceeding downside) within 2 quarters if the setup is to become attractive again. | →Stable |
| CounterAsymmetry ratios can flip quickly on a single positive earnings surprise, especially given the historical 66.6% average beat magnitude. | ||
Cerence trades above its 200-day moving average with rising on-balance volume, a bullish technical structure despite the negative fundamental risk/reward. Momentum breakdown | Price holds above the 200-day moving average for the next 2 quarters, confirming the technical uptrend persists. | →Stable |
| CounterAn elevated put/call ratio of 3.20 and 95% implied volatility suggest options markets are pricing a high probability of a sharp reversal despite current technical strength. | ||
Cerence trades at a rock-bottom PEG ratio of 0.05 and a forward P/E of 14.0x, screening as statistically cheap relative to its growth profile.
→StableValuation breakdown
- Expectation
- The PEG ratio stays below 0.5 and forward P/E remains below 20x over the next 12 months if the cheap valuation is sustained rather than a value trap.
CounterA PEG this low often reflects deteriorating fundamentals rather than a bargain — Cerence's revenue is declining 18% YoY, meaning the 'E' in PEG may be unreliable.
Cerence fails the Rule of 40 threshold with a score of only 3, and carries no competitive moat, despite being FCF-positive with a 20% FCF margin.
→StableQuality breakdown
- Expectation
- The Rule of 40 score improves above 20 within 12 months as either revenue growth or FCF margin improves.
CounterAn 18% revenue decline means the FCF margin could be a product of cost-cutting rather than durable profitability, and the failing Rule of 40 score confirms fundamental weakness.
Cerence has beaten consensus EPS in 3 of the last 4 quarters with an average surprise of 66.6%, suggesting analyst estimates have been persistently too conservative.
→StableEarnings
- Expectation
- The beat streak continues into the next print, extending to 4 of 5 quarters.
CounterA 14.7% theoretical downside per the target-reached signal suggests the market has already priced in continued beats, leaving little room for further re-rating.
The engine's asymmetry ratio is negative at -1.05, meaning downside risk (14.0%) exceeds upside potential, a structurally poor risk/reward setup.
→StableReward-to-risk math
- Expectation
- The asymmetry ratio should turn positive (upside exceeding downside) within 2 quarters if the setup is to become attractive again.
CounterAsymmetry ratios can flip quickly on a single positive earnings surprise, especially given the historical 66.6% average beat magnitude.
Cerence trades above its 200-day moving average with rising on-balance volume, a bullish technical structure despite the negative fundamental risk/reward.
→StableMomentum breakdown
- Expectation
- Price holds above the 200-day moving average for the next 2 quarters, confirming the technical uptrend persists.
CounterAn elevated put/call ratio of 3.20 and 95% implied volatility suggest options markets are pricing a high probability of a sharp reversal despite current technical strength.
TrendMatrix Research · core thesis
Engine thesis — one sentence
Cerence screens statistically cheap with a strong recent earnings-beat streak and bullish above-200-day-MA technicals, but a negative asymmetry ratio, an 18% revenue decline, and a failing Rule of 40 score point to extreme risk that the engine flags as an exit candidate.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
4.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 0.0 |
| ROA | 2.2 |
| Gross margin | 10.0 |
| Op margin | 0.0 |
| Net margin | 0.0 |
| Current ratio | 6.7 |
| FCF quality | 8.1 |
| Moat | 4.0 |
| Rule of 40 | 3.0 |
| Piotroski F | 6.7 |
- ▸FCF-positive despite GAAP loss (FCF margin 20%, FCF yield 12.4%)
- ▸No competitive moat
- ▸Rule of 40: 3 (fail)
Growth
5.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 0.0 |
| EPS growth | 10.0 |
- ▸Declining revenue: -18%
Momentum
3.0/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.5 |
| MACD | 3.0 |
| OBV | 1.0 |
| MA position | 4.0 |
| Volume | 1.3 |
- ▸Volume distribution (falling OBV)
- ▸Above 200-day MA
Sentiment
5.3/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 5.8 |
| erm sentiment | 5.0 |
Insider
7.5/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
- ▸Institutions accumulating
Peer rank
2.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 8.1 |
| quality rank | 1.8 |
| growth rank | 0.1 |
Technical
6.2/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 6.7 |
| support resistance | 7.1 |
| 52w position | 4.8 |
| gap | 6.0 |
Risk (lower is worse)
3.2/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 3.0 |
| days to cover | 5.4 |
| volatility | 0.0 |
| put call | 10.0 |
| implied vol | 0.0 |
| max pain risk | 3.0 |
| beta | 0.0 |
| debt equity | 4.6 |
- ▸High IV: 100%
- ▸Above max pain $2
- ▸Concentration risks: 2 MED (10-K Item 1A)
Catalyst
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 6.5 |
| earnings history | 6.7 |
| earnings timing | 5.0 |
| surprise avg | 10.0 |
- ▸Strong earnings: 3B/1M
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (5)
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:29d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- MOMENTUM:3.0<4.5
- ASYMMETRY:-0.7=NEGATIVE
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.68
Upside
-10.2%
Downside
15.0%
Sizing output
AVOID
SetupRange Bound — RSI 49 mid-range, Bollinger mid-band
EdgeCatalyst-Driven — Earnings in 29d with 3/4 beat streak
SuitabilityAggressive — Beta 2.99>1.3, MCap $0.5B<$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 ( Insider at 7.5) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:3.0<4.5, ASYMMETRY:-0.7=NEGATIVE) reinforce the read. Current asymmetry R:R is -0.68 — supplementary context, not the trigger for this path.
The strongest dimensions are Insider at 7.5, Catalyst at 7.0, and Value at 6.8; the weakest are Peer rank at 2.9, Momentum at 3.0, and Risk (lower is worse) at 3.2. The V9 engine flagged 2 failed gates with 1 warning, producing an asymmetric reward-to-risk of -0.68 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Peg Valuation Cheapness
Trip ifRevenue growth stays below 0% for 2 more consecutive quarters, confirming the low PEG reflects deterioration rather than mispricing.
- P2Earnings Beat Streak
Trip ifCerence misses consensus EPS estimates by more than 10% at its next earnings report.
- P3Negative Asymmetry Risk Reward
Trip ifThe asymmetry ratio stays below 0 for 2 consecutive quarterly refreshes.
- P4Bullish Technical Momentum Setup
Trip ifPrice closes below the 200-day moving average for more than 10 consecutive trading days.
- P5Revenue Decline Quality Concern
Trip ifThe Rule of 40 score stays below 10 for 2 consecutive quarters, confirming no improvement in the growth-plus-margin combination.