SWK

We rate STANLEY BLACK & DECKER, INC. (SWK) as a Reduce with a composite score of 47.7/100 at a current price of $89.22. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in momentum (57th percentile) and stability (48th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (30th percentile) and value (31th percentile) tempers our overall conviction. We assign a No Moat rating (30/100), High 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.

STANLEY BLACK & DECKER, INC. holds a top-quartile position (#0 of 50) within the Construction sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 47.7/100 places it at rank #2358 in our full 7,333-stock universe. With a $11.4B market capitalization, STANLEY BLACK & DECKER, INC. operates at meaningful scale within the Construction sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 0%, though momentum at the 57th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 29% (+5.5pp vs sector) narrow to operating margins of 2% (-5.5pp vs sector) and net margins of 2.0%, yielding a gross-to-net conversion rate of 7%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $89.22, STANLEY BLACK & DECKER, INC. is trading at a premium to fundamental value. Our value factor score of 31/100 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 premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 46.5x (a 143% premium to the sector median of 19.1x), EV/EBITDA of 24.2x (at a premium), P/B of 1.6x, P/S of 0.9x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to STANLEY BLACK & DECKER, INC.. Key risk factors include elevated market sensitivity (beta of 1.63), weak quality scores (30th percentile), elevated valuation multiple (P/E 46.5x) that leaves limited margin for error. The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.63); weak quality scores (30th percentile); elevated valuation multiple (P/E 46.5x) that leaves limited margin for error; the combination of leverage (59% D/E) and thin margins (2.0% net) amplifies downside risk. 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 48th percentile and quality factor at the 30th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: a 4.45% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate STANLEY BLACK & DECKER, INC.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 3.4%, and the balance sheet is managed within acceptable parameters (D/E: 59%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; STANLEY BLACK & DECKER, INC. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 4.45% dividend yield provides some income return, but 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, STANLEY BLACK & DECKER, INC. receives a Reduce rating with a composite score of 47.7/100 (rank #2358 of 7,333). Our quantitative framework assigns a No Moat (30/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 42/100.

Our analysis does not support a constructive view on STANLEY BLACK & DECKER, INC. at this time. The combination of limited competitive advantages, high uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.