Sonos Inc

Where It Passes

Where It Falls Short

• Profitability0% pass✓ 5✗ 30▾

  No clean pass — all 16 investors flag at least one profitability criterion

  Positive EPS (10 years)2/11 years positive

  ✗GrahamPositive EPS every year for 10 years

  EPS Growth (3-yr avg, 10-yr window)N/A (negative base EPS)

  ✗Graham>= 33% growth

  Net Income Positive (10+ years)2/11 years positive

  ✗BuffettPositive every year for 10+ years

  ROE (up to 5-year arithmetic mean)2.4%

  ✗Buffett> 15% arithmetic mean (app rule)

  Operating Margin (10-yr trend)-3.5% (latest)

  ✓BuffettStable or rising over 10 years

  Free Cash Flow Proxy$-27.5M

  ✗BuffettPositive and growing

  Earnings Variance (10-yr CoV)N/A (negative mean EPS)

  ✗BuffettCoV < 0.3

  Retained Earnings Effectiveness

  ✗Buffett$1 retained -> > $1 market value created

  Basic earnings-growth PEG (dividends excluded)

  ✗Lynch< 1.0 (ideally < 0.5)

  3-5 Year EPS CAGR

  ✗Lynch15-30% (Fast Grower); > 0% to pass

  ROE14.1%

  ✗Lynch> 15%

  EBIT / Enterprise Value-2.6%

  ✗Greenblatt> 10%

  Earnings Yield + ROC AssessmentEY=-2.6%, ROC=-102.5%

  ✗GreenblattBoth EY > 10% and ROC > 25%

  Net Income / Total Assets-7.43%

  ✗PiotroskiROA > 0

  ROA Change YoY-4.16% -> -7.43% (delta: -3.26%)

  ✗PiotroskiCurrent ROA > Prior ROA

  (CFO / Total Assets) vs ROACFO/Assets=16.62%, ROA=-7.43%

  ✓PiotroskiCFO/Assets > ROA

  Gross Margin Change YoY45.4% -> 43.7%

  ✗PiotroskiImproved YoY

  Pre-Tax Income / Revenue4.8%

  ✗Dreman>= 8%

  Net Income / Shareholders' Equity14.1%

  ✓Dreman> 12%

  Margin of SafetyP/B=6.1x

  ✗PabraiP/B < 1.5 or P/E < 15

  Return on Equity-9.4% (3-yr avg)

  ✗AkreROE > 20% (3-year avg)

  Discount to Intrinsic ValueN/A (negative normalized EPS)

  ✗Marks>= 20% below intrinsic value

  Positive Net Income Frequency2/11 years positive

  ✗MarksPositive net income in >= 7 of last 10 years

  Operating Income / Revenue4.4%

  ✗Ackman>= 15%

  Net Income / Shareholders Equity14.1%

  ✗Ackman>= 15%

  5-Year EPS CAGR

  ✗Templeton> 0% (5-year EPS CAGR)

  Operating Margin Trend-1.2% (2023) -> -3.5% (2025)

  ✗TempletonNon-negative operating-margin trend over 3 years

  Revenue growth vs. gross and operating margin trendgross margin 43.3% -> 43.7%, operating margin -1.2% -> -3.5%

  ✗SleepRevenue rising; gross margin flat or falling; operating margin holding

  Net income / market capitalization+2.68%; #2495/6340 (top 39.4%)

  ✗AsnessTop 30% of eligible cross-section✗OshaughnessyTop 10% of eligible cross-section

  Gross profit / total assets+78.58%; #258/3702 (top 7.0%)

  ✓AsnessTop 30% of eligible cross-section

  Net income / positive book equity+14.10%; #1250/5226 (top 23.9%)

  ✓AsnessTop 30% of eligible cross-section

  Negative 5-year standard deviation of ROA-0.0761; #3127/5884 (top 53.1%)

  ✗AsnessTop 30% of eligible cross-section

  3-5 Year Diluted EPS CAGR

  ✗Neff7%-20% annualized

  Positive Diluted-EPS Years2/10 years positive

  ✗Schloss>= 70% positive over 5-10 observed years (app rule)
• Growth0% pass✗ 13▾

  All 8 investors flag SONO's growth

  EPS Growth (3-yr avg, 10-yr window)N/A (negative base EPS)

  ✗Graham>= 33% growth

  Basic earnings-growth PEG (dividends excluded)

  ✗Lynch< 1.0 (ideally < 0.5)

  3-5 Year EPS CAGR

  ✗Lynch15-30% (Fast Grower); > 0% to pass

  Inventory Growth vs Revenue GrowthInv: 37.0% vs Rev: 5.6%

  ✗LynchInventory growth < Revenue growth

  EPS Growth Direction$-0.71 (2016) -> $-0.51 (2025)

  ✗DremanPositive over recent years

  EPS CAGR

  ✗Dreman> 5% annualized

  Positive Net Income Frequency2/11 years positive

  ✗MarksPositive net income in >= 7 of last 10 years

  3yr Median Revenue Growth-5.5%

  ✗Ackman>= 5%

  Positive EPS Growth Frequency1/5 years with positive EPS growth

  ✗AckmanPositive EPS growth in >= 3 of last 5 years

  5-Year EPS CAGR

  ✗Templeton> 0% (5-year EPS CAGR)

  Revenue growth vs. gross and operating margin trendgross margin 43.3% -> 43.7%, operating margin -1.2% -> -3.5%

  ✗SleepRevenue rising; gross margin flat or falling; operating margin holding

  5-year Revenue CAGR1.7%

  ✗SleepCAGR > 7%

  3-5 Year Diluted EPS CAGR

  ✗Neff7%-20% annualized
• Valuation models0% pass✗ 3▾

  SONO overvalued: all 3 models price fair value below $17.97 (median $7.45)

  Munger fair value$11.24

  ✗Munger-59.9% margin vs $17.97

  Ackman fair value$7.45

  ✗Ackman-141.2% margin vs $17.97

  Templeton fair value$2.16

  ✗Templeton-731.9% margin vs $17.97
• Debt & Leverage8% pass✓ 3✗ 12▾

  11 of 12 flag SONO's debt & leverage — Graham, Buffett, Lynch +8 more

  LT Debt vs Net Current Assets

  ✗GrahamLT Debt <= Net Current Assets

  Debt/Equity & Interest Coverage

  ✗BuffettD/E < 0.5 AND Interest Coverage > 5x

  Total Debt / Equity

  ✗Lynch< 0.33

  Cash - Long-term Debt

  ✗LynchPositive preferred

  LT Debt / Total Assets Change0.00% -> 0.00%

  ✓PiotroskiDecreased YoY

  Current Assets / Current Liabilities1.61

  ✓Dreman> 1.5✓SchlossCurrent ratio >= 1.50x (app cutoff)

  Total Debt / Shareholders' Equity

  ✗Dreman< 0.8✗Templeton< 1.0 (fixed cap; proxy for below-sector-median leverage)✗SchlossD/E < 1.00x

  Debt Levels

  ✗MungerDebt/Equity < 0.5✗AkreDebt/Equity < 0.3

  Interest Coverage & Debt/EBITDAIC=-180.9x, D/EBITDA=N/A

  ✗MarksInterest Coverage > 3x; Debt/EBITDA < 4x

  Total Debt / Shareholders Equity

  ✗Ackman<= 1.0

  Negative debt-to-equity (higher means less debt)

  ✗AsnessTop 30% of eligible cross-section
• Valuation8% pass✓ 2✗ 26▾

  12 of 13 flag SONO's valuation — Graham, Lynch, Greenblatt +9 more

  Price / 3-yr avg EPS

  ✗Graham<= 15x

  Price-to-Book Ratio6.1x

  ✗Graham<= 1.5x

  P/E x P/B

  ✗Graham<= 22.5

  Basic earnings-growth PEG (dividends excluded)

  ✗Lynch< 1.0 (ideally < 0.5)

  EBIT / Enterprise Value-2.6%

  ✗Greenblatt> 10%

  Earnings Yield + ROC AssessmentEY=-2.6%, ROC=-102.5%

  ✗GreenblattBoth EY > 10% and ROC > 25%

  Price / EPS

  ✗Dreman< 12x✗Templeton< 12x (fixed ceiling; proxy for the market's cheapest 40%)

  Price / (CFO / Shares)15.8x

  ✗Dreman< 8x

  Price / Book Value per Share6.1x

  ✗Dreman< 1.2x✗Templeton< 1.5x✗SchlossP/B <= 0.80x (app cutoff)

  Valuation ReasonablenessOE Yield=-1.3%

  ✗MungerP/E < 25 or Owner Earnings Yield > 5%

  P/E or FCF YieldFCF Yield=5.1%

  ✗PabraiP/E < 15 or FCF Yield > 10%

  P/B or P/E vs. Historical AverageP/B=6.1x

  ✗MarksP/E < 15 or P/B < 2.0

  Discount to Intrinsic ValueN/A (negative normalized EPS)

  ✗Marks>= 20% below intrinsic value

  Price / FCF per Share19.9x

  ✓Ackman<= 25

  Price vs. Trailing Low195% of trailing low ($9.21)

  ✗Templeton<= 120% of trailing low (certified split-adjusted live window)

  Net income / market capitalization+2.68%; #2495/6340 (top 39.4%)

  ✗AsnessTop 30% of eligible cross-section✗OshaughnessyTop 10% of eligible cross-section

  Positive book equity / market capitalization+0.1898; #4235/6449 (top 65.7%)

  ✗AsnessTop 30% of eligible cross-section

  Price / Diluted EPS

  ✗NeffP/E <= 15x (app proxy for a P/E 40%-60% below the market)

  (EPS CAGR % + Dividend Yield %) / P/E

  ✗Neff> 0.7 (Neff's published traditional edge)

  Price / Tangible Book Value per Share10.95x

  ✗SchlossP/TBV <= 1.00x (app cutoff)

  Book Value per Share Change+11.6%

  ✓SchlossLatest BVPS >= earliest BVPS over >= 3 years (app rule)

  Revenue / market capitalization+0.7011; #2198/5247 (top 41.9%)

  ✗OshaughnessyTop 10% of eligible cross-section

  (Operating cash flow - capex) / market capitalization+5.09%; #1565/4519 (top 34.6%)

  ✗OshaughnessyTop 10% of eligible cross-section

  Trailing six-month price return through the evaluation date+38.55%; #839/6202 (top 13.5%)

  ✗OshaughnessyTop 10% of eligible cross-section
• Verdicts14% pass✓ 2✗ 12▾

  Split decision: 11 FAIL · 3 NEUTRAL · 2 PASS

  Overall verdict

  ✗GrahamFAIL (1/9)✗BuffettFAIL (1/9)✗LynchFAIL (0/7)✗GreenblattRank #2331✓PiotroskiPASS (F-Score 5)✗DremanFAIL (3/11)✗MungerFAIL (1/4)✗PabraiFAIL (0/3)✗AkreFAIL (1/6)✗MarksFAIL (1/5)✓AckmanPASS (4/9)✗TempletonFAIL (1/8)•SleepNEUTRAL (4/6)•AsnessNEUTRAL (Not ranked)✗NeffFAIL (2/6)✗SchlossFAIL (2/7)•OshaughnessyNEUTRAL (Not ranked)
• Efficiency25% pass✓ 3✗ 8▾

  6 of 8 flag SONO's efficiency — Graham, Buffett, Greenblatt +3 more

  Current Ratio1.61

  ✗Graham>= 2.0

  ROIC (3-5 yr avg)-25.8%

  ✗Buffett> 10%

  ROIC - WACC-35.8%

  ✗BuffettPositive (WACC = 10%)

  EBIT / (NWC + Net Fixed Assets)-102.5%

  ✗Greenblatt> 25%

  Current Ratio Change YoY1.51 -> 1.43

  ✗PiotroskiIncreased YoY

  Revenue / Total Assets Change YoY1.66x -> 1.75x

  ✓PiotroskiImproved YoY

  Current Assets / Current Liabilities1.61

  ✓Dreman> 1.5

  Return on Invested Capital

  ✗Munger> 15%

  ROIC (high and growing)FY2023: ROIC=unavailable; FY2024: ROIC=unavailable; FY2025: ROIC=unavailable

  ✗AkreLatest 3 consecutive FYs: ROIC > 15% in each

  Reinvestment Rate x ROIC

  ✗AkreReinvestment Rate * ROIC > 10%

  ROIC (5-year)1/1 years above 12% (latest 21.5%)

  ✓SleepROIC > 12% in a majority of years
• Cash Flow50% pass✓ 7✗ 5▾

  5 of 10 pass — Buffett, Lynch, Dreman +2 more object

  Free Cash Flow Proxy$-27.5M

  ✗BuffettPositive and growing

  FCF Positive and Growing$108.2M

  ✗LynchPositive and growing

  Operating Cash Flow$136.9M

  ✓PiotroskiCFO > 0

  (CFO / Total Assets) vs ROACFO/Assets=16.62%, ROA=-7.43%

  ✓PiotroskiCFO/Assets > ROA

  Price / (CFO / Shares)15.8x

  ✗Dreman< 8x

  P/E or FCF YieldFCF Yield=5.1%

  ✗PabraiP/E < 15 or FCF Yield > 10%

  FCF Positive7/10 years FCF positive

  ✓MarksPositive FCF in majority of recent years

  (OCF - CapEx) / Market Cap5.0%

  ✓Ackman>= 4%

  Price / FCF per Share19.9x

  ✓Ackman<= 25

  Positive Operating Cash Flow frequency9/10 years positive

  ✓SleepPositive OCF in >= 70% of available years

  Operating Cash Flow - Capital Expenditures$108.2M

  ✓Neff> $0 (app proxy for a strong fundamental case)

  (Operating cash flow - capex) / market capitalization+5.09%; #1565/4519 (top 34.6%)

  ✗OshaughnessyTop 10% of eligible cross-section