What a brutal six months it’s been for JELD-WEN. The stock has dropped 63.6% and now trades at $3.87, rattling many shareholders. This might have investors contemplating their next move.
Is now the time to buy JELD-WEN, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think JELD-WEN Will Underperform?
Despite the more favorable entry price, we're cautious about JELD-WEN. Here are three reasons why you should be careful with JELD and a stock we'd rather own.
1. Core Business Falling Behind as Demand Declines
In addition to reported revenue, organic revenue is a useful data point for analyzing Home Construction Materials companies. This metric gives visibility into JELD-WEN’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, JELD-WEN’s organic revenue averaged 11.8% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests JELD-WEN might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Free Cash Flow Margin Dropping
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.
As you can see below, JELD-WEN’s margin dropped by 10.7 percentage points over the last five years. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s in the middle of a big investment cycle. JELD-WEN’s free cash flow margin for the trailing 12 months was negative 4.1%.
3. New Investments Fail to Bear Fruit as ROIC Declines
ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative 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, JELD-WEN’s ROIC has unfortunately decreased significantly. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.
Final Judgment
We see the value of companies helping their customers, but in the case of JELD-WEN, we’re out. Following the recent decline, the stock trades at 6.3× forward P/E (or $3.87 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.
Stocks We Would Buy Instead of JELD-WEN
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