Could Kyndryl Stock’s Cash Flow Spark the Next Rally?
We think Kyndryl (KD) stock is worth a look: It is growing, producing cash, and available at a significant valuation discount. 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.
What Is Happening With KD
KD stock is available at a significant discount to its 3-month, 1-year, and 2-year highs. This can be attributed to a downward revised fiscal 2026 outlook and an evolving IBM relationship. Recent leadership changes and SEC requests regarding cash management also contributed.
The stock may not reflect it yet, but here is what’s going well for the company. Despite projected fiscal 2026 revenue decline, Kyndryl Consult revenue grew 24% and hyperscaler revenue surged 58% in Q3. Strong free cash flow, a growing gross profit backlog, and good debt coverage indicate momentum, suggesting a valuation discount.
KD Has Strong Fundamentals
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- Cash Yield: Kyndryl offers an impressive cash flow yield of 10.2%.
- Growing: Revenue growth of 0.1% over the last twelve months is not that great, but your cash pile is likely to grow.
- Valuation Discount: KD stock is currently trading at 53% below its 3-month high, 70% below its 1-year high, and 70% below its 2-year high.
Below is a quick comparison of KD fundamentals with S&P medians.
| KD | S&P Median | |
|---|---|---|
| Sector | Information Technology | – |
| Industry | IT Consulting & Other Services | – |
| Free Cash Flow Yield | 10.2% | 4.0% |
| Revenue Growth LTM | 0.1% | 6.6% |
| Operating Margin LTM | 4.3% | 18.8% |
| PS Ratio | 0.2 | 3.3 |
| PE Ratio | 11.7 | 24.8 |
| Discount vs 3-Month High | -53.3% | -7.0% |
| Discount vs 1-Year High | -70.4% | -10.9% |
| Discount vs 2-Year High | -70.4% | -12.5% |
*LTM: Last Twelve Months
But What About The Risk Involved?
While KD stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. KD fell nearly 80% during the Inflation Shock. That’s a steep drop, even with any positives in the background. It shows how vulnerable the stock can be when markets turn. Good fundamentals matter, but in a selloff, losses can get brutal fast. This kind of volatility means risk is real, no matter how solid things look on paper. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, and outlook changes. Read KD Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
If you want to see more details, read Buy or Sell KD Stock.
Other Stocks Like KD
Not ready to act on KD? You could consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Positive revenue growth
- High free cash flow yield
- Meaningful discount to 3M, 1Y, and 2Y highs
A portfolio that was built starting 12/31/2016 with stocks that fulfill the criteria above would have performed as follows:
- Average 6-month and 12-month forward returns of 25.7% and 57.9% respectively
- Win rate (percentage of picks returning positive) of >70% for both 6-month and 12-month periods
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