While the S&P 500 is up 27.9% since April 2025, FedEx (currently trading at $237.60 per share) has lagged behind, posting a return of 15.1%. This might have investors contemplating their next move.

Is there a buying opportunity in FedEx, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.

Why Do We Think FedEx Will Underperform?

We're sitting this one out for now. Here are three reasons why FDX 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, FedEx grew its sales at a sluggish 4.4% compounded annual growth rate. This fell short of our benchmark for the industrials sector.

2. Mediocre Free Cash Flow Margin Limits Reinvestment Potential

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

FedEx has shown poor cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 2.4%, lousy for an industrials business.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared 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, FedEx’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

We see the value of companies helping their customers, but in the case of FedEx, we’re out. With its shares trailing the market in recent months, the stock trades at 12.8× forward P/E (or $237.60 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are more exciting stocks to buy at the moment. We’d suggest looking at a top digital advertising platform riding the creator economy.

Stocks We Would Buy Instead of FedEx

Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

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