UMAC

We rate Unusual Machines, Inc. (UMAC) as a Reduce with a composite score of 44.9/100 at a current price of $13.31. 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 (70th percentile) and value (49th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (18th percentile) and investment (28th percentile) tempers our overall conviction. We assign a No Moat rating (24/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: sustainability of the current growth rate; the path to profitability. 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.

Unusual Machines, Inc. 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 44.9/100 places it at rank #2820 in our full 7,333-stock universe. At $460M in market capitalization, Unusual Machines, 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 51% and momentum in the 70th 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 28th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 32% (-10.7pp vs sector) narrow to operating margins of -207% (-207.9pp vs sector) and net margins of -138.2%, yielding a gross-to-net conversion rate of -435%. 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 $13.31, Unusual Machines, Inc. is trading near fair value based on current fundamentals. Our value factor score of 49/100 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. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 276.2x (a 1141% premium to the sector median of 22.3x), EV/EBITDA of 126.2x (at a premium), P/B of 4.8x, P/S of 65.4x. 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 Very High uncertainty rating to Unusual Machines, Inc.. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 2.65), current negative profitability (net margin -138.2%), below-average price stability (18th percentile). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 2.65); current negative profitability (net margin -138.2%); below-average price stability (18th percentile); elevated valuation multiple (P/E 276.2x) that leaves limited margin for error. 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 18th percentile and quality factor at the 36th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (7% 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 warrants caution and disciplined position management.

We rate Unusual Machines, Inc.'s capital allocation as Poor. Key concerns include low returns on equity (-10.2%), negative profitability, weak asset returns (ROA -9.5%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Unusual Machines, Inc. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Unusual Machines, Inc. receives a Reduce rating with a composite score of 44.9/100 (rank #2820 of 7,333). Our quantitative framework assigns a No Moat (24/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 40/100.

Our analysis does not support a constructive view on Unusual Machines, Inc. at this time. The combination of limited competitive advantages, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.