Value
7.5/10data confidence 83%| Component | Sub-score |
|---|---|
| P/S | 10.0 |
| EV/EBITDA | 5.8 |
| Fwd P/E | 5.5 |
| PEG | 10.0 |
| Analyst target | 6.0 |
- ▸Forward P/E: 23.2x
- ▸PEG: 0.14
- ▸Attractively valued
MEI · Why this verdict
Why Methode Electronics (MEI) 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 score5.8/10
ConfidenceMEDIUM
MacroNEUTRAL
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Despite an overall quality score of 3.1 sitting below the engine's 4.0 floor, the underlying Piotroski F-Score of 8 out of 9 signals genuine balance-sheet and profitability strength. Quality breakdown | The overall quality score should climb toward or above 4.0 as margin and moat components catch up to the strong Piotroski reading. | →Stable |
| CounterThe quality score also reflects the complete absence of a competitive moat, which the strong F-Score alone cannot offset. | ||
The company has missed earnings estimates in 2 of the last 4 quarters with an average surprise of -28.3%, including misses of -42.9% and -85.0% in the two most recent prints. Earnings | The beat/miss ratio should improve toward at least 2 beats out of the next 4 quarters with average surprise turning positive. | →Stable |
| CounterThe immediately prior quarter came in in-line and the quarter before that beat estimates, suggesting the miss streak may already be reversing. | ||
The V9 engine's asymmetry gate failed at a 0.49 ratio against the required 1.5 threshold, meaning the risk-reward skew at spot price does not clear the bar for full position sizing. Engine gate (failed) | The asymmetry ratio should rise above 1.5 as upside targets expand or the entry price pulls back. | →Stable |
| CounterA 7.4% modeled upside against a defined stop-loss still offers a positive expected value even below the strict 1.5 gate threshold. | ||
Technicals show a golden cross with price above all moving averages and bullish RSI and MACD readings, but the momentum score of 5.4 sits just under the engine's stronger 5.5 soft threshold. Chart pattern detection | The momentum score should cross above 5.5 as the breakout gains follow-through volume. | →Stable |
| CounterFalling on-balance volume during the breakout raises doubts about whether the move can sustain enough buying pressure to clear 5.5. | ||
The stock shows 2 of 5 value-trap signals — high leverage at a 4.5 debt-to-equity ratio and negative free cash flow — despite trading at a compelling 0.14 PEG ratio. Bear case | Debt-to-equity should decline and free cash flow should turn positive, dropping the value-trap signal count below 2 of 5. | →Stable |
| CounterA 0.14 PEG ratio implies the market is already pricing in significant growth that could offset near-term leverage concerns. | ||
Despite an overall quality score of 3.1 sitting below the engine's 4.0 floor, the underlying Piotroski F-Score of 8 out of 9 signals genuine balance-sheet and profitability strength.
→StableQuality breakdown
- Expectation
- The overall quality score should climb toward or above 4.0 as margin and moat components catch up to the strong Piotroski reading.
CounterThe quality score also reflects the complete absence of a competitive moat, which the strong F-Score alone cannot offset.
The company has missed earnings estimates in 2 of the last 4 quarters with an average surprise of -28.3%, including misses of -42.9% and -85.0% in the two most recent prints.
→StableEarnings
- Expectation
- The beat/miss ratio should improve toward at least 2 beats out of the next 4 quarters with average surprise turning positive.
CounterThe immediately prior quarter came in in-line and the quarter before that beat estimates, suggesting the miss streak may already be reversing.
The V9 engine's asymmetry gate failed at a 0.49 ratio against the required 1.5 threshold, meaning the risk-reward skew at spot price does not clear the bar for full position sizing.
→StableEngine gate (failed)
- Expectation
- The asymmetry ratio should rise above 1.5 as upside targets expand or the entry price pulls back.
CounterA 7.4% modeled upside against a defined stop-loss still offers a positive expected value even below the strict 1.5 gate threshold.
Technicals show a golden cross with price above all moving averages and bullish RSI and MACD readings, but the momentum score of 5.4 sits just under the engine's stronger 5.5 soft threshold.
→StableChart pattern detection
- Expectation
- The momentum score should cross above 5.5 as the breakout gains follow-through volume.
CounterFalling on-balance volume during the breakout raises doubts about whether the move can sustain enough buying pressure to clear 5.5.
The stock shows 2 of 5 value-trap signals — high leverage at a 4.5 debt-to-equity ratio and negative free cash flow — despite trading at a compelling 0.14 PEG ratio.
→StableBear case
- Expectation
- Debt-to-equity should decline and free cash flow should turn positive, dropping the value-trap signal count below 2 of 5.
CounterA 0.14 PEG ratio implies the market is already pricing in significant growth that could offset near-term leverage concerns.
TrendMatrix Research · core thesis
Engine thesis — one sentence
MEI shows a technical breakout and a surprisingly strong Piotroski F-Score despite a below-floor overall quality reading, but recent earnings misses and a failed asymmetry gate temper conviction.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Per-dimension breakdown
Quality
3.1/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 0.0 |
| ROA | 0.5 |
| Gross margin | 0.0 |
| Op margin | 2.0 |
| Net margin | 0.0 |
| Current ratio | 8.1 |
| Moat | 5.0 |
| Piotroski F | 8.9 |
- ▸No competitive moat
- ▸Strong Piotroski F-Score: 8/9
Growth
8.2/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 6.5 |
| EPS growth | 10.0 |
Momentum
5.1/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 5.0 |
| MACD | 1.4 |
| OBV | 10.0 |
| MA position | 9.0 |
| Volume | 0.1 |
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.0/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| Price target | 8.1 |
| erm sentiment | 5.0 |
- ▸Analyst upside: 25%
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
4.9/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 9.7 |
| quality rank | 1.6 |
| growth rank | 4.5 |
Technical
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 4.2 |
| support resistance | 4.8 |
| 52w position | 5.2 |
| gap | 6.0 |
Risk (lower is worse)
4.0/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.5 |
| days to cover | 8.5 |
| volatility | 0.0 |
| put call | 0.0 |
| implied vol | 0.0 |
| max pain risk | 3.0 |
| beta | 5.1 |
| debt equity | 7.9 |
- ▸Elevated put/call: 2.13
- ▸High IV: 103%
- ▸Above max pain $2
- ▸Concentration risks: 2 MED (10-K Item 1A)
Catalyst
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 1.1 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 5.5 |
- ▸Earnings concerns: 1B/2M
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCKPassed (7)
- MOMENTUM:5.1>=4.5
- INSIDER:OK
- 8K:CLEAN
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:63d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (1)
- ASYMMETRY:0.4<1.5@spot
Warning (1)
- MOMENTUM:5.1<5.5 (soft — BUY_NOW allowed but watch)
Reward-to-Risk
0.39
Upside
+5.9%
Downside
15.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeInst Constrain — Small cap ($0.5B) below institutional reach
SuitabilityAggressive — Beta 1.47>1.3, MCap $0.5B<$5B
Investment implication
The L1 gate blocked the positive-verdict path: a hard-floor threshold was breached, so dimensional pillars — including Growth at 8.2 could not lift the engine output above the verdict floor. Failed gate signal: ASYMMETRY:0.4<1.5@spot.
The strongest dimensions are Growth at 8.2, Value at 7.5, and Insider at 7.5; the weakest are Quality at 3.1, Catalyst at 3.3, and Risk (lower is worse) at 4.0. The V9 engine flagged 1 failed gate with 1 warning, producing an asymmetric reward-to-risk of 0.39 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Quality Below Floor Despite Piotroski
Trip ifOverall quality score falls below 2.0, showing the Piotroski strength did not translate into improved fundamentals.
- P2Earnings Momentum Deteriorating
Trip ifEarnings beat rate rises to at least 3 of the next 4 quarters with average surprise exceeding 0%.
- P3Asymmetry Gate Failure
Trip ifAsymmetry ratio exceeds 1.5, clearing the V9 gate threshold at spot price.
- P4Momentum Breakout Just Below Threshold
Trip ifMomentum score falls below 4.5, breaking the golden-cross breakout setup.
- P5Value Trap Leverage And Cash Burn
Trip ifDebt-to-equity ratio falls below 2.0 from the current 4.5 level, or free cash flow turns positive for 2 consecutive quarters.