Frontdoor Inc (FTDR, Financial) recently saw a daily gain of 10.23%, despite a 3-month loss of -9.13%. With an Earnings Per Share (EPS) (EPS) of 1.56, the question arises: Is the stock modestly undervalued? To answer this, we'll delve into a comprehensive valuation analysis of Frontdoor. We invite you to join us on this exploration.
Company Overview
Frontdoor Inc, a United States-based company, offers home service plans through its various brands including American Home Shield, HSA, OneGuard, and Landmark. The company's service plans help customers maintain their homes and protect against costly and unexpected breakdowns of essential home systems and appliances. Currently, the stock price stands at $31.89, while the GF Value, an estimation of fair value, is $38.55. This discrepancy paves the way for a deeper exploration of Frontdoor's value.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It is derived from historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally be traded.
According to GuruFocus Value calculation, Frontdoor (FTDR, Financial) is believed to be modestly undervalued. The current price of $31.89 per share and the market cap of $2.60 billion indicate that Frontdoor stock is trading below its fair value. As a result, the long-term return of its stock is likely to be higher than its business growth.
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Assessing Financial Strength
Investing in companies with low financial strength could result in permanent capital loss. Hence, it's crucial to review a company's financial strength before deciding to buy shares. Frontdoor has a cash-to-debt ratio of 0.56, ranking lower than 50.96% of 104 companies in the Personal Services industry. GuruFocus ranks Frontdoor's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent long-term profitability, poses less risk. Frontdoor has been profitable eight times over the past ten years. The company had a revenue of $1.70 billion and an EPS of $1.56 over the past twelve months. Its operating margin is 12.73%, ranking better than 74.53% of 106 companies in the Personal Services industry. GuruFocus ranks the profitability of Frontdoor at 8 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. Frontdoor's average annual revenue growth is 8.1%, ranking better than 65.31% of 98 companies in the Personal Services industry. However, its 3-year average EBITDA growth is -17.4%, ranking worse than 81.33% of 75 companies in the Personal Services industry.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to the Weighted Average Cost of Capital (WACC) can provide insights into its profitability. Frontdoor's ROIC is 18.56, and its WACC is 9.46, suggesting the company is creating value for shareholders.
Conclusion
In conclusion, Frontdoor (FTDR, Financial) is believed to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. However, its growth ranks worse than 81.33% of 75 companies in the Personal Services industry. To learn more about Frontdoor stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
