JLL trades at $291.06 and has moved in lockstep with the market. Its shares have returned 35.6% over the last six months while the S&P 500 has gained 33.2%.

Is now the time to buy JLL, or should you be careful about including it in 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 JLL Will Underperform?

We're sitting this one out for now. Here are three reasons why JLL 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. Regrettably, JLL’s sales grew at a sluggish 6.9% compounded annual growth rate over the last five years. This was below our standard 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.

JLL 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 2.2%, lousy for a consumer discretionary business.

3. Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

JLL historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.8%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

Final Judgment

JLL doesn’t pass our quality test. That said, the stock currently trades at 16.4× forward P/E (or $291.06 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. Let us point you toward an all-weather company that owns household favorite Taco Bell.

Stocks We Would Buy Instead of JLL

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