AIN: Sell
Published 16 Sep 2026, 07:02 BST. This is the frozen version, not the current recommendation.
Why this assessment was issued
The model version changed. The published model version has been replaced. Record the new calculation basis even if the rating is unchanged. The central target is 37.6% below the price, meeting the 25% downside requirement. That decline also exceeds or matches the stronger-case upside of 10.4%. This is a valuation view, not a finding that the business is poor.
The central target is 37.6% below the price, meeting the 25% downside requirement. That decline also exceeds or matches the stronger-case upside of 10.4%. This is a valuation view, not a finding that the business is poor.
Supporting evidence
Year-to-date profit has improved
Across 2 completed quarters since 2025-12-31, net income was 32.7m versus 26.5m in the matching prior-year periods (USD). Check whether the latest quarter changes that direction.
More sales are becoming operating profit
The latest quarterly operating margin was 9.8%, +2.6 percentage points from a year earlier. Compare the sales and margin contributions below.
Opposing evidence
Interest cover is thin
Debt less cash was 373.3m at 2026-06-30. Operating profit covered interest -1.1 times.
Payouts exceed cash after capital spending
Dividends and buybacks totalled 97.2m versus 58.5m of cash after capital spending over four quarters. Existing cash or borrowing can fund a difference.
The original scenarios
| Scenario | Sales growth | Profit margin | Model value |
|---|---|---|---|
| Weaker | 1.8% | 9.2% | $16.91 |
| Central | 6.8% | 12.7% | $37.59 |
| Stronger | 11.8% | 16.1% | $66.52 |
Method: Cash flow across the cycle. Loss periods, gaps or differences in the earnings basis make P/E less useful here. This assessment uses operating profit, capital spending and the balance sheet instead. Loss years remain in the margin history. The earnings method could not pass its required checks; the cash-flow method passed its own input checks. These scenarios are not probability intervals.
Original assumptions and checks
| tax | 25 |
|---|---|
| price | 60.28 |
| years | 1.1991786447638604 |
| claims | 6400000.0 |
| growth | 6.809505337314848 |
| margin | -2.380553432696748 |
| profit | -51185000.0 |
| shares | 28371147.0 |
| cash_ok | True |
| debt_ok | True |
| growths | [-12.383959032930502, 11.95552534811175, 7.811991384265893, 5.807019290363802] |
| revenue | 1223455000.0 |
| discount | 9.220092222581592 |
| downside | 71.94559046954012 |
| interest | 25449000.0 |
| leverage | 1.8335133606509024 |
| net_debt | 373320000.0 |
| terminal | 2 |
| free_cash | 58489000.0 |
| ppe_ratio | 0.38205246617162053 |
| buy_hurdle | 25.03095081681414 |
| extra_debt | 55333546.060468756 |
| volatility | 40.06190163362828 |
| basis_notes | [] |
| capex_ratio | 0.050793858376482995 |
| share_ratio | Not available |
| annual_years | 5 |
| capital_cost | {'tax': 25.0, 'beta': 1.1239001520048095, 'debt': 450669000.0, 'beta_end': '2026-09-11', 'discount': 9.220092222581592, 'debt_cost': 6.46, 'risk_free': 4.96, 'beta_start': '2023-09-22', 'beta_weeks': 156, 'source_url': 'https://home.treasury.gov/resource-center/data-chart-center/interest-rates', 'debt_weight': 20.85579193973257, 'equity_cost': 10.373000506682697, 'equity_value': 1710212741.16, 'adjusted_beta': 1.0826001013365396, 'credit_spread': 1.5, 'equity_premium': 5.0, 'risk_free_date': '2026-09-11', 'observed_interest': 5.646938218515141} |
| depreciation | 6.458676453159291 |
| normal_capex | 6.458676453159291 |
| tax_measured | False |
| current_capex | 5.079385837648299 |
| working_ratio | 0.362381125582878 |
| financial_date | 2026-06-30 |
| interest_cover | 6.081538288449795 |
| operating_cash | 120633000.0 |
| terminal_share | 81.93023934684759 |
| reporting_basis | quarterly |
| uncapped_growth | 6.809505337314848 |
| projected_margin | 12.65016432175755 |
| historical_margin | 12.65016432175755 |
| year5_value_share | 81.93023934684759 |
| depreciation_ratio | 0.06458676453159291 |
| net_debt_at_target | 428653546.06046873 |
| non_operating_assets | 0 |
Recent price · Passed. Weekly close dated 2026-09-11.
Current financials · Passed. Statements through 2026-06-30; factor prices dated 2026-09-11.
Price risk · Passed. Risk uses the latest 52 weekly price changes.
Operating history · Passed. 5 annual results, retaining operating losses and unusually strong years.
Quarterly operating results · Passed. Four quarters through 2026-06-30.
Cash-flow and ownership inputs · Passed. Capital spending, depreciation estimate, operating capital, debt, cash and other ownership claims are recorded.
Depreciation basis · Passed. Four matching quarters of operating income and reported depreciation are required. An unrelated EBITDA-minus-EBIT difference is not treated as depreciation.
Matching currency · Passed. USD statements and share price.
Operating totals · Passed. Quarterly sales and operating profit agree with the trailing snapshot within 5%.
Operating discount rate · Passed. The operating cash-flow discount rate needs a current USD Treasury rate, at least two years of matching market returns, and dated debt and share inputs. An equity return hurdle is not used as the company's funding cost.
Continuing growth and funding cost · Passed. The funding cost must exceed continuing growth in every valuation scenario.
Scenario consistency · Passed. The weaker, central and stronger assumptions must give an ordered range. When growth costs more capital than it earns, a tailored operating review is required before publishing a target.
Target publication review · Passed. The model estimate is within SM's automatic publication range of one quarter to four times the current price. This is a review threshold, not evidence that the market price is correct.
Cash-flow value dependence · Passed. Cash flows beyond year five account for 81.9% of the absolute present value. This is within SM's 90% automatic publication limit.
Policy sm-review-2-research · Model sm-assessment-13-assumption-review · Data 403b09c8af40.