FTDR - Embedded Expectations Analysis - 2021 03 11
frontdoor, inc. (FTDR:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 26.2x Uniform P/E. Even at these levels, the market has bearish expectations for the firm. Although management's concerns about customer retention, real estate home service volume, and their liquidity position suggest the potential for near-term headwinds, market expectations are too bearish and equity outperformance is likely warrantedSpecifically, management may have concerns about the sustainability of their offerings' value proposition, the availability of real estate buyer data, and continued declines in the number of first year real estate home service plans. Furthermore, they may lack confidence in their ability to improve customer retention, maintain their liquidity position, and capitalize on elevated appliance service demand. Additionally, management may be concerned about the unfavorable impact of existing home sales disruption on their home servicing businesses, projected increases in capital expenditures, and their decision to flex their net debt leverage ratio up to finance acquisitions
Although management's concerns about customer retention, real estate home service volume, and their liquidity position suggest the potential for near-term headwinds, market expectations are too bearish given the firm's robust profitability and the booming macro tailwinds for the business. As such, equity outperformance is likely warranted
Frontdoor is a provider of home service plans in the U.S., and operates under the American Home Shield, HSA, OneGuard and Landmark brands. The company's home service plans help customers protect and maintain their homes, typically their asset, from costly and unplanned breakdowns of essential home systems and appliances. The company's home service plans cover the repair or replacement of main components of household systems and appliances, including electrical, plumbing, central heating, ventilation and air conditioning systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops. The company serves customers across various states and the District of Columbia.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.