High Cash Flow Yield And Solid Fundamentals, You Might Want To Look At EXPE

Here is why we think EXPE is worth a look

• Not many stocks offer free cash flow yield of 11.0%, but EXPE does
• 3-Year average revenue growth of 13.2% and operating margin of 11.4% show good fundamentals
• At PE of 18.6, this combo of cash yield, growth, and margin could get noticed

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

Proof That It Works

Here are some stocks that showed strong cash flow yield in mid 2024, and saw strong returns in the subsequent 12 months

• 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 Risk

Expedia’s no exception when it comes to market turmoil. It lost about 83% in the Global Financial Crisis, 63% during the Covid pandemic, and 61% in the recent inflation shock. Even the 2018 correction wasn’t mild, with a nearly 40% drop. Good fundamentals matter, but in big sell-offs, this kind of volatility shows the risks investors face.

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.