DJCO

We rate DAILY JOURNAL CORP (DJCO) as a Hold with a composite score of 57.4/100 at a current price of $515.17. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in value (87th percentile) and momentum (66th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (29th percentile) and quality (56th percentile) tempers our overall conviction. We assign a No Moat rating (39/100), Low uncertainty, and Standard capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. 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.

DAILY JOURNAL CORP holds a top-quartile position (#0 of 50) within the Manufacturing sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 57.4/100 places it at rank #968 in our full 7,333-stock universe. At $641M in market capitalization, DAILY JOURNAL CORP is a small-cap player in the Manufacturing space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 12% and favorable momentum (66th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 37% (-5.5pp vs sector) narrow to operating margins of 6% (+5.1pp vs sector) and net margins of 82.0%, yielding a gross-to-net conversion rate of 222%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $515.17, DAILY JOURNAL CORP appears undervalued relative to its fundamentals. Our value factor score of 87/100 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 11.6x (a 48% discount to the sector median of 22.3x), EV/EBITDA of 128.5x (at a premium), P/B of 1.9x, P/S of 9.1x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to DAILY JOURNAL CORP. The company exhibits strong financial stability with a beta of 0.99, conservative leverage (38% D/E), and a stability factor in the 64th 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.

We identify no major risk factors at this time. The company's stability factor sits at the 64th percentile with quality at the 56th percentile, both of which support our low-risk assessment. The absence of material leverage, profitability, or volatility concerns reduces the likelihood of a permanent capital loss scenario.

Key risk mitigants include: above-average stability (64th 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 DAILY JOURNAL CORP's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 16.2%, and the balance sheet is managed within acceptable parameters (D/E: 38%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; DAILY JOURNAL CORP 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, DAILY JOURNAL CORP receives a Hold rating with a composite score of 57.4/100 (rank #968 of 7,333). Our quantitative framework assigns a No Moat (39/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 61/100.

Our analysis supports a neutral stance on DAILY JOURNAL CORP. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.