Report by Forensic Alpha

SMCI moves to Forensic Alpha's maximum ‘10’ risk rating after its 10Q revealed extreme working-capital swings: receivables surged from $2.5bn to $11bn in one quarter, heavily concentrated in a single customer, while payables ballooned to $13.8bn, masking weak cash conversion. Bloom Energy also remains a top concern, with a widening gap between adjusted and statutory earnings, rising contract assets and growing reliance on off-balance-sheet JVs. NiSource’s score rose on higher DSO and advances to unconsolidated VIEs, while Cummins saw a jump in sales to equity investees to $1.70bn, with receivables outstanding from these investees of $523m, suggesting extended credit terms. Other stocks flagged last week include Amentum, Atlassian, Becton Dickinson, Ford and Impinj.

Consumer Discretionary

Report by Valens Research

The combination of Ford’s cash flows and cash on hand should be sufficient to meet all obligations including debt maturities through 2028. Furthermore, the firm’s large M/Cap and moderate recovery rate should allow it to access credit markets to refinance, if necessary. Despite this strong credit profile, credit markets are grossly overstating Ford’s credit risk with a 5-year CDS of 377 bps and a YTW on its 2025 bonds near 5.5%, relative to an Intrinsic CDS and YTW of 71 bps and 3.5%, respectively. As a result, credit investors are being over-compensated for the risk they are accepting and Ford’s bonds could make for a good addition in a corporate bond portfolio.