CODA

We rate Coda Octopus Group, Inc. (CODA) as a Buy with a composite score of 74.4/100 at a current price of $14.25. The stock scores above average across the majority of our six quantitative factors and ranks #17 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in value (90th percentile) and quality (83th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (32th percentile) and stability (66th percentile) tempers our overall conviction. We assign a Narrow Moat rating (48/100), Low uncertainty, and Standard capital allocation.

Key items to watch: sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Coda Octopus Group, Inc. holds a top-quartile position (#7 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 74.4/100 places it at rank #17 in our full 7,333-stock universe. At $115M in market capitalization, Coda Octopus Group, Inc. is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 33% and momentum in the 79th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 32th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 68% (+25.5pp vs sector) narrow to operating margins of 18% (+17.0pp vs sector) and net margins of 18.0%, yielding a gross-to-net conversion rate of 26%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $14.25, Coda Octopus Group, Inc. appears undervalued relative to its fundamentals. Our value factor score of 90/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The stock screens as attractively priced on a majority of these measures, suggesting the market may be underappreciating the underlying fundamentals.

The stock currently trades at a P/E of 34.6x (a 56% premium to the sector median of 22.3x), EV/EBITDA of 28.4x (at a premium), P/B of 2.6x, P/S of 6.1x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to Coda Octopus Group, Inc.. The company exhibits strong financial stability with a beta of 0.52, conservative leverage (11% D/E), and a stability factor in the 66th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: low beta of 0.52 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 66th percentile and quality factor at the 83th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 68% provide a buffer against cost pressures; conservative leverage (11% D/E) limits balance sheet risk; above-average stability (66th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Coda Octopus Group, Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 7.5%, and the balance sheet is managed within acceptable parameters (D/E: 11%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Coda Octopus Group, Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Coda Octopus Group, Inc. receives a Buy rating with a composite score of 74.4/100 (rank #17 of 7,333). Our quantitative framework assigns a Narrow Moat (48/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 70/100.

Our analysis supports a constructive view on Coda Octopus Group, Inc.. The combination of identifiable competitive advantages, low uncertainty, and standard capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.