3 Reasons BHE is Risky and 1 Stock to Buy Instead

Benchmark has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 14.6% to $44.48 per share while the index has gained 11.7%.

Is there a buying opportunity in Benchmark, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.

Why Is Benchmark Not Exciting?

We're cautious about Benchmark. Here are three reasons you should be careful with BHE and a stock we'd rather own.

1. Revenue Tumbling Downwards

We at StockStory place the most emphasis on long-term growth, but within business services, a stretched historical view may miss recent innovations or disruptive industry trends. Benchmark’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 5.1% over the last two years.

2. Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Benchmark’s EPS grew at an unimpressive 5.4% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 5.1% annualized revenue declines and tells us management adapted its cost structure in response to a challenging demand environment.

3. Breakeven Free Cash Flow Limits Reinvestment Potential

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.

Benchmark broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.

Final Judgment

Benchmark isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 18.5× forward P/E (or $44.48 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We're fairly confident there are better stocks to buy right now. We’d suggest looking at a top digital advertising platform riding the creator economy.

Stocks We Would Buy Instead of Benchmark

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