Value
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 7.8 |
| P/S | 8.9 |
| EV/EBITDA | 4.9 |
| Fwd P/E | 8.1 |
| PEG | 7.7 |
| Analyst target | 4.0 |
- ▸Forward P/E: 14.6x
- ▸PEG: 0.89
LII · Why this verdict
Why Lennox International (LII) 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 score4.7/10
ConfidenceHIGH
MacroRISK_OFF
TrendMatrix Research · core thesis
Engine thesis — one sentence
Lennox International is a high-quality industrial business with a return on equity of 77% and consistent earnings execution, but with the current price sitting about 1.4% below near-term resistance and a reward-to-risk ratio of 0.2-to-1, the setup strongly favors waiting for a better entry over adding exposure at current levels.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
The company generates a return on equity of 77% and operating margins of 15%, ranking best-in-class on profitability within its peer group — a track record of high-return capital allocation that has historically supported a premium valuation. Quality breakdown | Return on equity stays above 50% and operating margins hold above 12% over the next four quarters, confirming the profitability advantage is durable. | ↓Deteriorating |
| CounterA debt-to-equity ratio of 1.6 amplifies the reported return on equity mechanically; free cash flow converts at only 24% of net income — flagged as a quality concern — suggesting that headline returns overstate the true cash-generation profile available to shareholders. | ||
Three of the four most recently reported quarters resulted in earnings beats, with an average positive surprise of 3.9% — a record of modest but consistent above-expectations delivery that reflects disciplined guidance. Earnings | The earnings beat streak extends to four or more consecutive quarters and the average positive surprise remains above 3% over the next two reporting periods. | →Stable |
| CounterThe second most recent quarter produced a miss of -5.74%, showing the company is not immune to shortfalls; at a forward P/E near 20x, even modest misses can reprice the stock meaningfully. | ||
About 1.4% of headroom remains to the near-term resistance target, and the reward-to-risk ratio at current levels is 0.2-to-1 — meaning the potential downside to support is roughly five times the remaining upside — making the current setup unfavorable for new positions. Price targets | A pullback of at least 8% from current levels, or a meaningful upward revision to analyst price targets, restores the reward-to-risk ratio above 1.5-to-1, creating a more attractive entry. | →Stable |
| CounterStrong momentum — RSI at 59, bullish MACD, volume accumulation, and the stock trading above its 200-day moving average — can carry prices through near-term resistance; sustained earnings beats could prompt target upgrades that reset the geometry without requiring a price pullback. | ||
Revenue and earnings growth are both running soft relative to peers, ranking in the lower half of the competitive set — a dynamic that constrains the multiple-expansion case and makes the current valuation reliant on quality alone, without growth as a secondary tailwind. Bear case | Revenue growth accelerates meaningfully over the next two quarters, lifting the growth profile above the peer median and providing an additional fundamental catalyst alongside the quality premium. | ↓Deteriorating |
| CounterA best-in-class quality business can sustain a premium multiple without strong revenue growth if earnings per share keep expanding through margin improvement and capital return — both of which are plausible given the company's high return on equity and consistent buyback history. | ||
The company generates a return on equity of 77% and operating margins of 15%, ranking best-in-class on profitability within its peer group — a track record of high-return capital allocation that has historically supported a premium valuation.
↓DeterioratingQuality breakdown
- Expectation
- Return on equity stays above 50% and operating margins hold above 12% over the next four quarters, confirming the profitability advantage is durable.
CounterA debt-to-equity ratio of 1.6 amplifies the reported return on equity mechanically; free cash flow converts at only 24% of net income — flagged as a quality concern — suggesting that headline returns overstate the true cash-generation profile available to shareholders.
Three of the four most recently reported quarters resulted in earnings beats, with an average positive surprise of 3.9% — a record of modest but consistent above-expectations delivery that reflects disciplined guidance.
→StableEarnings
- Expectation
- The earnings beat streak extends to four or more consecutive quarters and the average positive surprise remains above 3% over the next two reporting periods.
CounterThe second most recent quarter produced a miss of -5.74%, showing the company is not immune to shortfalls; at a forward P/E near 20x, even modest misses can reprice the stock meaningfully.
About 1.4% of headroom remains to the near-term resistance target, and the reward-to-risk ratio at current levels is 0.2-to-1 — meaning the potential downside to support is roughly five times the remaining upside — making the current setup unfavorable for new positions.
→StablePrice targets
- Expectation
- A pullback of at least 8% from current levels, or a meaningful upward revision to analyst price targets, restores the reward-to-risk ratio above 1.5-to-1, creating a more attractive entry.
CounterStrong momentum — RSI at 59, bullish MACD, volume accumulation, and the stock trading above its 200-day moving average — can carry prices through near-term resistance; sustained earnings beats could prompt target upgrades that reset the geometry without requiring a price pullback.
Revenue and earnings growth are both running soft relative to peers, ranking in the lower half of the competitive set — a dynamic that constrains the multiple-expansion case and makes the current valuation reliant on quality alone, without growth as a secondary tailwind.
↓DeterioratingBear case
- Expectation
- Revenue growth accelerates meaningfully over the next two quarters, lifting the growth profile above the peer median and providing an additional fundamental catalyst alongside the quality premium.
CounterA best-in-class quality business can sustain a premium multiple without strong revenue growth if earnings per share keep expanding through margin improvement and capital return — both of which are plausible given the company's high return on equity and consistent buyback history.
Per-dimension breakdown
Quality
6.5/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 10.0 |
| ROA | 10.0 |
| Gross margin | 2.5 |
| Op margin | 8.2 |
| Net margin | 6.9 |
| Current ratio | 4.6 |
| FCF quality | 3.9 |
| Moat | 6.0 |
| Piotroski F | 6.7 |
- ▸Excellent ROE: 63%
- ▸Earnings quality RED FLAG: 49% FCF/NI
Growth
2.5/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 5.0 |
| EPS growth | 0.0 |
Momentum
2.2/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 4.5 |
| MACD | 0.0 |
| OBV | 1.0 |
| MA position | 1.0 |
| Volume | 4.6 |
- ▸Volume distribution (falling OBV)
- ▸Below 200-MA, MA slope -4.2%/30d — confirmed downtrend
Sentiment
4.6/10data confidence 100%| Component | Sub-score |
|---|---|
| LLM sentiment | 2.8 |
| Analyst rating | 5.0 |
| Price target | 6.2 |
- ▸LLM news sentiment: -0.43 (n=7)
Insider
4.2/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 4.6 |
| notable moves | 3.0 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
5.0/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 6.8 |
| quality rank | 8.6 |
| growth rank | 4.4 |
- ▸Attractive P/E vs peers
- ▸Superior ROE vs peers
Technical
5.5/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 8.4 |
| support resistance | 6.4 |
| 52w position | 1.8 |
Risk (lower is worse)
4.5/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 5.2 |
| days to cover | 5.3 |
| volatility | 1.2 |
| put call | 7.2 |
| implied vol | 5.7 |
| max pain risk | 3.0 |
| beta | 6.3 |
| debt equity | 3.8 |
| news risk | 3.0 |
- ▸Above max pain $290
Catalyst
4.9/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 3.5 |
| earnings history | 3.3 |
| earnings timing | 5.0 |
| surprise avg | 1.6 |
| dividend safety | 8.0 |
| news activity | 8.0 |
- ▸Earnings concerns: 2B/2M
- ▸Dividend aristocrat: 1.6% yield
How the verdict was assembled
Engine trigger
Multiple concerning factors. Consider reducing position.
Engine technical detail
verdict_path:
L4:PATH_F_SELLPassed (4)
- INSIDER:OK
- EARNINGS_PROXIMITY:94d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (3)
- MOMENTUM:2.2<4.5
- ASYMMETRY:-0.7=NEGATIVE
- DEATH_CROSS:HARD_BLOCK
Warning (1)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.66
Upside
-6.0%
Downside
9.1%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilitySpeculative — Drawdown -41% (>40% off 52w high)
Investment implication
The F-path SELL output reflects an overall score of 3.0 below the 5.6 soft trigger — multiple weakening dimensions accumulated rather than a single hard-floor breach. The strongest dimension ( Value at 6.8) was not enough to lift the adjusted overall above the threshold. Co-occurring failed gates ( MOMENTUM:2.2<4.5, ASYMMETRY:-0.7=NEGATIVE, DEATH_CROSS:HARD_BLOCK) reinforce the read. Current asymmetry R:R is -0.66 — supplementary context, not the trigger for this path.
The strongest dimensions are Value at 6.8, Quality at 6.5, and Technical at 5.5; the weakest are Momentum at 2.2, Growth at 2.5, and Insider at 4.2. The V9 engine flagged 3 failed gates with 1 warning, producing an asymmetric reward-to-risk of -0.66 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Consistent Earnings Execution
Trip ifAverage quarterly EPS surprise falls below 0% for 2 consecutive quarters.
- P2Best In Class Returns And Margins
Trip ifOperating margins compress below 10% for 2 consecutive quarters.
- P3Price At Resistance Poor Geometry
Trip ifReward-to-risk ratio improves above 1.5-to-1 as the stock pulls back more than 10% from current levels or analyst price targets rise more than 15% above current consensus.
- P4Soft Revenue And Earnings Growth
Trip ifRevenue growth exceeds 8% year-over-year for 2 consecutive quarters, signaling a meaningful acceleration from the current soft trend.