Over the past six months, Cushman & Wakefield’s stock price fell to $13.40. Shareholders have lost 13.1% of their capital, which is disappointing considering the S&P 500 has climbed by 7.7%. This might have investors contemplating their next move.
Is now the time to buy Cushman & Wakefield, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Cushman & Wakefield Will Underperform?
Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons you should be careful with CWK and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Cushman & Wakefield grew its sales at a weak 5.6% compounded annual growth rate. This was below our standard for the consumer discretionary sector.
2. Free Cash Flow Projections Disappoint
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
Over the next year, analysts’ consensus estimates show they’re expecting Cushman & Wakefield’s free cash flow margin of 2.9% for the last 12 months to remain the same.
3. New Investments Fail to Bear Fruit as ROIC Declines
A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).
We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. On average, Cushman & Wakefield’s ROIC decreased by 1.8 percentage points annually each year over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
Cushman & Wakefield falls short of our quality standards. Following the recent decline, the stock trades at 9.6× forward P/E (or $13.40 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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