Accounting red flags emerge across multiple names
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.
Edition: 230
- 20 February, 2026
Technology
PI acts like a hot, semiconductor / IoT company (up 100%+ since its lows in late Oct 23), even though it’s not an AI play - instead, it’s a small, plain RFID (radio frequency identification) company that bulls think has achieved a tipping point, while Hedgeye argues new adoption trends have been more episodic than sustainable. PI paints itself as a market leader, but it has been a market share loser over the past decade. Furthermore, it faces significant risk of its largest customer one day becoming a competitor. Growth expectations are wildly optimistic and the stock trades at a very expensive 11x 2024 EV/Sales and 9.5x 2025 EV/Sales. 40% downside.
Edition: 180
- 23 February, 2024
Technology
The developer of radio frequency identification chips used in RFID tags benefited when companies were facing supply chain issues which resulted in ordering much more inventory than necessary. Hamed Khorsand thinks it is unrealistic for revenue growth to match last year's strong performance especially since PI is heavily dependent on retail apparel and its largest customer is talking about a challenging environment. He argues the stock is priced for perfection - it currently trades at a price to sales multiple of 8.2 times and a forward PE of 44. Hamed’s TP is $45 (50% downside).
Edition: 164
- 07 July, 2023
Technology
Limited capacity has hindered the company's ability to capitalise on demand. Whilst they were able to secure upside foundry capacity, it was in 200mm rather than 300mm wafers. This caused PI to transition some customers back to older products. Sales have been artificially inflated as customers have been overbuying wafers in response to capacity constraints. Anomalous insider activity appears concerning; Declining accrued compensation may boost earnings; TTM stock-based compensation exceeds 20% of sales; PI trades at a premium relative to historical norms as well as to peers.
Edition: 145
- 30 September, 2022