CBRE trades at $158.18 per share and has stayed right on track with the overall market, gaining 21% over the last six months. At the same time, the S&P 500 has returned 18.6%.

Is now the time to buy CBRE, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think CBRE Will Underperform?

We're sitting this one out for now. Here are three reasons why CBRE doesn't excite us and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, CBRE grew its sales at a tepid 9.4% compounded annual growth rate. This fell short of our benchmark for the consumer discretionary sector.

2. Mediocre Free Cash Flow Margin Limits Reinvestment Potential

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

CBRE has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.6%, lousy for a consumer discretionary business.

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, CBRE’s ROIC averaged 4.2 percentage point decreases each year. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

CBRE doesn’t pass our quality test. That said, the stock currently trades at 24.7× forward P/E (or $158.18 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward our favorite semiconductor picks and shovels play.

Stocks We Like More Than CBRE

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