If You Like Cash Flow Machines Take A Look At GDDY
Here is why we think GoDaddy (GDDY) is worth a look
- Not many stocks offer free cash flow yield of 5.4%, but GDDY does
- Last 12 month revenue growth of 7.7% and operating margin of 16.8% show good fundamentals
- While tad expensive at PE of 33.8, the combo of cash yield, growth, and margin could still get noticed
- Compared to S&P, you get higher valuation, but higher growth, and better LTM operating margins
That is one way to look at stocks. Trefis High Quality Portfolio evaluates much more, and is designed to reduce stock-specific risk while giving upside exposure
| GDDY | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | Internet Services & Infrastructure | – |
| Free Cash Flow Yield | 5.4% | 3.9% |
| Revenue Growth LTM | 7.7% | 5.0% |
| Revenue Growth 3YAVG | 6.0% | 5.9% |
| Operating Margin LTM | 21.1% | 18.8% |
| Operating Margin 3YAVG | 16.8% | 17.5% |
| PE Ratio | 33.8 | 23.8 |
The Point? The Market Can Notice, And Reward
Here are some stocks that showed strong cash flow yield in mid 2024, and saw strong returns in the subsequent 12 months
- The Next Big Rally in Ford Motor Stock Could Start Like This
- The Risk Factors to Watch Out For in NVIDIA Stock
- Intuitive Surgical Stock Now 16% Cheaper, Time To Buy
- AT&T Stock Pays Out $85 Bil – Investors Take Note
- Intel Stock Pays Out $92 Bil – Investors Take Note
- Comcast Stock Capital Return Hits $44 Bil
- FFIV gained 70% in a year after showing a 6.9% free cash flow yield
- CSCO had 6.6% yield, and returned 50% in the next 12 months
- PM rose over 85% percent as the market noticed its 5.7% free cash flow yield and good underlying growth
But Consider The Risk
That said, GoDaddy isn’t immune to big drops. It fell about 29% in the 2018 correction, nearly 47% during the Covid pandemic, and around 30% in the inflation shock. Even with positive long-term trends, these dips show the stock still faces sharp sell-offs when markets get shaky. Solid fundamentals only go so far when panic hits.
Picking winners on a consistent basis is not an easy task – especially given the volatility associated with a single stock. Instead, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.