STM

We rate STMicroelectronics N.V. (STM) as a Buy with a composite score of 65.3/100 at a current price of $34.14. The stock scores above average across the majority of our six quantitative factors and ranks #275 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 (78th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (36th percentile) and stability (52th percentile) tempers our overall conviction. We assign a Narrow Moat rating (64/100), Medium uncertainty, and Exemplary 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.

STMicroelectronics N.V. 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 65.3/100 places it at rank #275 in our full 7,333-stock universe. With a $22.5B market capitalization, STMicroelectronics N.V. operates at meaningful scale within the Manufacturing sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue contraction of -23% combined with momentum at the 60th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 39% (-3.2pp vs sector) narrow to operating margins of 13% (+11.3pp vs sector) and net margins of 11.8%, yielding a gross-to-net conversion rate of 30%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $34.14, STMicroelectronics N.V. 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 19.6x (roughly in line with the sector median of 22.3x), EV/EBITDA of 2.2x (discounted to peers), P/B of 1.7x, P/S of 0.6x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Medium uncertainty rating to STMicroelectronics N.V.. The stock presents a balanced risk profile: elevated market sensitivity (beta of 1.88). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.88). 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 52th percentile and quality factor at the 78th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (17% D/E) limits balance sheet risk. 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 STMicroelectronics N.V.'s capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 35.9%, disciplined leverage (17% D/E). Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — STMicroelectronics N.V. meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. The company returns capital via a 1.32% dividend yield, and the combination of 25.3% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, STMicroelectronics N.V. receives a Buy rating with a composite score of 65.3/100 (rank #275 of 7,333). Our quantitative framework assigns a Narrow Moat (64/100, trend: stable), Medium uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 63/100.

Our analysis supports a constructive view on STMicroelectronics N.V.. The combination of identifiable competitive advantages, medium uncertainty, and exemplary 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.