Frontdoor Stock Attracting Bullish Views From Wall Street

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Frontdoor Inc Is a Game-Changer in Home Services That Will Reward Investors

Stocks that attract bullish comments and buying from insiders tend to move higher. This is the case with mid-cap Frontdoor Inc (NASDAQ:FTDR), a business unit that was spun off from Servicemaster Global Holdings Inc (NYSE:SERV) in October 2018.

Frontdoor sells home service protection plans that guard against breakdowns such as appliances, plumbing, electrical, and other maintenance issues.

Think about your home and all of the problems that could arise and cause financial strife. If you buy a plan to pay for these services, you may feel more comfortable.

FTDR has benefited from this demand to become the largest provider of home service plans in the country.

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At the time of this writing, Frontdoor stock was hovering around the midpoint of its post-spin-off range, well down from its high of $49.92 in October 2018.

Chart courtesy of StockCharts.com

But Frontdoor stock has been easily outperforming the S&P 500, up 28% this year.

My Bullish Case for FTDR Stock

On the revenue front, Frontdoor delivered higher revenue in three consecutive years, growing 37.2% from fiscal 2015 to 2018.

Fiscal Year Revenue
2015 $900.0 Million
2016 $1.0 Billion
2017 $1.2 Billion
2018 $1.3 Billion

(Source: “frontdoor, inc. (FTDR),” Yahoo! Finance, last accessed April 18, 2019.)

The company’s revenue growth is expected to continue at 8.6% to $1.4 billion in 2019 and at 8.6% to $1.5 billion in 2020. (Source: Ibid.)

Frontdoor is profitable on both a generally accepted accounting principles (GAAP) basis and an adjusted basis.

Fiscal Year Net Income
2015 $120.0 Million
2016 $124.0 Million
2017 $160.0 Million
2018 $125.0 Million

(Source: Ibid.)

After adjusting for certain expenses, Frontdoor is expected to report an adjusted $1.52 per diluted share in 2019, followed by $1.90 in 2020. (Source: Ibid.)

On a quarterly basis, Frontdoor has beaten the consensus earnings per share (EPS) in two straight quarters.

Frontdoor produced positive free cash flow of $146.0 million in 2018. (Source: “frontdoor inc.MarketWatch, last accessed April 18, 2019.)

Analyst Take

Frontdoor may not be the most exciting business, but the company has been growing its revenue and it is profitable.

The business of providing insurance for homeowners against everyday breakdowns is an interesting concept that may pick up.

Investors who are interested in FTDR stock should maintain a long-term view; they could be rewarded with above-average price appreciation.