UDN

We rate INVESCO DB US DOLLAR INDEX BEARISH FUND (UDN) as a Reduce with a composite score of 46.7/100 at a current price of $18.36. 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 stability (94th percentile) and quality (57th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (22th percentile) and value (25th percentile) tempers our overall conviction. We assign a Narrow Moat rating (49/100), Low uncertainty, and Standard capital allocation.

Key items to watch: sustainability of the current growth rate; valuation compression risk if growth disappoints. 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.

INVESCO DB US DOLLAR INDEX BEARISH FUND holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 46.7/100 places it at rank #2527 in our full 7,333-stock universe. At N/A in market capitalization, INVESCO DB US DOLLAR INDEX BEARISH FUND is a small-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 112%, though momentum at the 45th 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 100% (+23.5pp vs sector) narrow to operating margins of 84% (+67.2pp vs sector) and net margins of 342.3%, yielding a gross-to-net conversion rate of 342%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $18.36, INVESCO DB US DOLLAR INDEX BEARISH FUND is trading at a premium to fundamental value. Our value factor score of 25/100 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.

Valuation multiples are not available for this company, which limits our ability to assess relative pricing. We rely more heavily on factor-based valuation signals in such cases.

We assign a Low uncertainty rating to INVESCO DB US DOLLAR INDEX BEARISH FUND. The company exhibits strong financial stability with a beta of -0.07, conservative leverage (0% D/E), and a stability factor in the 94th 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 -0.07 — 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 94th percentile and quality factor at the 57th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 100% provide a buffer against cost pressures; conservative leverage (0% D/E) limits balance sheet risk; above-average stability (94th 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 INVESCO DB US DOLLAR INDEX BEARISH FUND's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 8.0%, and the balance sheet is managed within acceptable parameters (D/E: 0%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; INVESCO DB US DOLLAR INDEX BEARISH FUND 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, INVESCO DB US DOLLAR INDEX BEARISH FUND receives a Reduce rating with a composite score of 46.7/100 (rank #2527 of 7,333). Our quantitative framework assigns a Narrow Moat (49/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 49/100.

Our analysis does not support a constructive view on INVESCO DB US DOLLAR INDEX BEARISH FUND at this time. The combination of the current quantitative profile, low uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.