Strong Cash Yield: Is Broadridge Financial Solutions Stock A Buy?
Broadridge Financial Solutions (BR) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market
BR Has Good Fundamentals
- Good Cash Yield: Not many stocks offer free cash flow yield of 7.0%, but Broadridge Financial Solutions stock does
- Strong Margin: Last 12 month operating margin of 17.2%
- Growth: Last 12 revenue growth of 7.4% – low growth, but this selection is all about high yield and margin
- Valuation: BR stock currently trading at 39% below 2Y high, 14% below 1M high, and at a PS lower than 3Y average.
Below is a quick comparison of BR fundamentals with S&P medians.
| BR | S&P Median | |
|---|---|---|
| Sector | Industrials | – |
| Industry | Data Processing & Outsourced Services | – |
| Free Cash Flow Yield | 7.0% | 4.3% |
| Revenue Growth LTM | 7.4% | 6.8% |
| Revenue Growth 3YAVG | 7.2% | 5.5% |
| Operating Margin LTM | 17.2% | 18.6% |
| Operating Margin 3YAVG | 16.5% | 18.1% |
| PE Ratio | 17.6 | 24.3 |
*LTM: Last Twelve Months
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But What Is The Risk Involved?
While BR stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. BR took some hits over the years, dropping 59% in the Global Financial Crisis, 36% during the Covid pandemic, and 33% in the 2018 correction. Even the latest inflation shock wasn’t mild, with a 27% dip from peak to bottom. Sure, BR might look solid on paper, but these numbers show how rough it can get when the market turns. No matter how strong the fundamentals, big sell-offs tend to drag down most stocks, BR included. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read BR Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
For more details and our view, see Buy or Sell BR Stock.
Stocks Like BR
Not ready to act on BR? Consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Dipped last month & meaningfully below 2Y high
- Current P/S < last few year average
- Strong operating margin with no instances of large margin collapse
- High free cash flow yield
A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:
- Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
- Win rate (percentage of picks returning positive) of about 74% for 12-month period
- Strategy consistent across market cycles
The Right Way To Invest Is Through Portfolios
Single stocks swing wildly, but staying invested matters. A well-built portfolio helps you stay invested, captures upside, and softens the blows from individual stocks.
Why settle for average market returns? The Trefis High Quality (HQ) Portfolio invests in a diverse group of 30 stocks that have collectively delivered stronger upside with reduced volatility compared to the broader indices. Discover the methodology behind these smoother, higher returns by checking the HQ Portfolio performance data.