Over the past six months, Cushman & Wakefield’s shares (currently trading at $11.11) have posted a disappointing 17.2% loss while the S&P 500 was down 1.1%. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Cushman & Wakefield, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Even though the stock has become cheaper, we don't have much confidence in Cushman & Wakefield. Here are three reasons why we avoid CWK and a stock we'd rather own.

Why Do We Think Cushman & Wakefield Will Underperform?

With expertise in the commercial real estate sector, Cushman & Wakefield (NYSE: CWK) is a global Chicago-based real estate firm offering a comprehensive range of services to clients.

1. Long-Term Revenue Growth Disappoints

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Cushman & Wakefield’s 1.5% annualized revenue growth over the last five years was weak. This fell short of our benchmarks.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Cushman & Wakefield, its EPS declined by 11.1% annually over the last five years while its revenue grew by 1.5%. This tells us the company became less profitable on a per-share basis as it expanded.

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).

Cushman & Wakefield historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 5.9%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Cushman & Wakefield, we’ll be cheering from the sidelines. Following the recent decline, the stock trades at 9.6× forward price-to-earnings (or $11.11 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.

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