FTDR Stock Trades Near 52-Week High: Is It Still Worth Buying?

Core Viewpoint - Frontdoor, Inc. (FTDR) is experiencing significant investor interest, with its stock nearing a 52-week high and demonstrating strong performance compared to industry peers and broader market indices [1][2][3]. Stock Performance - FTDR shares have increased by 21.8% over the past three months, outperforming the Zacks Building Products - Miscellaneous industry's 3.3% rise and the S&P 500's growth of 8% [2]. - The stock is currently trading around $59 per share, just below its 52-week peak of $60.42 [1]. Market Position and Strategy - Frontdoor is the leading provider of home warranties in the U.S. and is focused on expanding brand awareness and direct-to-consumer efforts [2][5]. - The company's marketing campaign has significantly increased brand awareness for American Home Shield (AHS) from 39% in 2022 to over 54% by the end of the third quarter [6]. Customer Engagement and Retention - The direct-to-consumer (DTC) customer count has grown, with retention rates improving by 150 basis points to a record high of 77.7% in the third quarter [9]. - The company is enhancing customer engagement through initiatives like the new AHS app launched in November [6]. Financial Position - FTDR's net cash provided by operations was $212 million in the first nine months of 2024, up from $139 million a year ago [14]. - The company has completed a $400 million share repurchase program and has repurchased 3.2 million shares for $119 million from the start of 2024 through August [15][16]. Acquisitions and Growth Initiatives - Frontdoor is pursuing growth through acquisitions, including a $1.47 billion credit facility to fund the acquisition of 2-10 Home Buyers Warranty and refinance existing debt [12][13]. - The acquisition is expected to close in the fourth quarter, supporting the company's long-term expansion plans [13]. Industry Outlook - Despite challenges in the home warranty sector due to reduced consumer spending and a sluggish real estate market, there are signs of improvement with existing home inventory rising to 4.3 months of supply [10]. - Mortgage rates have declined, which may spur increased demand from homebuyers, positively impacting the home warranty market [11]. Financial Metrics - FTDR's return on invested capital (ROIC) stands at 35.75%, significantly higher than the industry average of 8.83%, indicating effective capital allocation and operational efficiency [18]. Earnings Estimates - The Zacks Consensus Estimate for FTDR's 2025 EPS has increased by 6.5% in the past 60 days, reflecting analysts' growing confidence in the stock [19].