Cushman & Wakefield (CWK): Buy, Sell, or Hold Post Q4 Earnings?

Over the past six months, Cushman & Wakefield’s shares (currently trading at $13.53) have posted a disappointing 11.9% loss, well below the S&P 500’s 6.6% gain. This may have investors wondering how to approach the situation.

Is now the time to buy Cushman & Wakefield, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Do We Think Cushman & Wakefield Will Underperform?

Despite the more favorable entry price, we don't have much confidence in Cushman & Wakefield. Here are three reasons you should be careful with CWK and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. 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. Over the last few years, Cushman & Wakefield’s ROIC averaged 1.8 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Cushman & Wakefield, we’ll be cheering from the sidelines. After the recent drawdown, the stock trades at 9.3× forward P/E (or $13.53 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 suggest looking at the most entrenched endpoint security platform on the market.

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