Frontdoor Inc (NASDAQ:FTDR): A Value Investment Analysis

Value investing involves finding companies trading below their intrinsic worth, focusing on those with sound fundamentals that the market has temporarily not recognized. This approach aims to benefit from the difference between a company's current market price and its actual business value, needing detailed examination of financial condition, earnings, and growth potential. By using organized screening techniques, investors can find possible chances where good fundamentals meet appealing prices.

Valuation Assessment

Frontdoor Inc (NASDAQ:FTDR) presents noteworthy valuation metrics that fit with value investing ideas. The company's present trading multiples indicate possible underappreciation relative to both industry counterparts and wider market measures.

Key valuation measures include:

• Price-to-Earnings ratio of 12.56, much less than the S&P 500 average of 25.45
• Forward P/E ratio of 12.20, versus industry average of 22.83
• Enterprise Value to EBITDA ratio less than 70.89% of industry rivals
• Price-to-Free Cash Flow ratio more appealing than 82.28% of sector counterparts

These metrics show the company trades at a discount to its intrinsic value, an important factor for value investors who look for a margin of safety in their investments. The valuation score of 7/10 shows this middle ground between appealing price and fundamental quality.

Financial Health Analysis

The company maintains acceptable financial health with a score of 6/10, indicating both positive aspects and points to watch. Frontdoor's balance sheet shows enough short-term liquidity while having average debt amounts.

Notable health measures include:

• Current ratio of 1.73, more than 70.89% of industry counterparts
• Altman-Z score of 3.33, showing low bankruptcy chance
• Debt-to-Free Cash Flow ratio of 3.41, indicating workable debt handling
• Steady share count decrease over recent years

While the debt-to-equity ratio of 3.64 is a point of attention, the company's good cash flow creation helps reduce this concern. For value investors, acceptable financial health confirms the company can endure economic slowdowns while maintaining operations.

Profitability Strength

Frontdoor performs well in profitability with a score of 9/10, showing very good operational effectiveness and returns on capital. The company's capacity to produce steady profits gives fundamental backing for its business model.

Profitability points of note include:

• Return on Equity of 83.23%, exceeding 98.73% of industry rivals
• Return on Invested Capital of 17.51%, within industry frontrunners
• Operating margin of 20.70%, more than 86.08% of counterparts
• Five-year history of steady earnings and positive cash flow

These solid profitability measures are important for value investors, as they signal the company has lasting competitive strengths and effective management, important elements in establishing long-term intrinsic value.

Growth Considerations

The growth score of 4/10 shows varied results, with good past performance but tempered future outlooks. While previous growth has been notable, analysts forecast some slowing in upcoming periods.

Growth path shows:

• 25.23% EPS growth in the past year
• 12.08% yearly EPS growth over recent years
• 11.88% revenue growth in the past year
• Projected EPS decrease of 8.44% per year in coming years

For value investors, average growth outlooks can present a chance, as they might add to the stock's underappreciation while still giving sufficient business growth to support intrinsic value increase over time.

Investment Perspective

The mix of appealing valuation, solid profitability, and acceptable financial health makes Frontdoor Inc a candidate for review for value-focused investors. The company's fundamental analysis report shows a business trading below its evident worth while keeping good operational performance.

Value investors usually look for companies where market negativity has created a price difference from basic business quality. Frontdoor's position seems to match this description, with the market possibly not fully valuing the company's solid profitability and cash flow creation because of growth worries.

For investors looking for similar chances, more screening outcomes are available using this value stock screener that finds companies with positive valuation features together with sound fundamentals.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance does not guarantee future results.