Although the S&P 500 is down 1.4% over the past six months, BrightView’s stock price has fallen further to $13.27, losing shareholders 15.7% of their capital. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in BrightView, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why we avoid BV and a stock we'd rather own.
Why Do We Think BrightView Will Underperform?
An official field consultant for Major League Baseball, BrightView (NYSE:BV) offers landscaping design, development, and maintenance.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, BrightView grew its sales at a sluggish 2.3% compounded annual growth rate. This was below our standards. 
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 BrightView, its EPS declined by 6.5% annually over the last five years while its revenue grew by 2.3%. 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).
BrightView historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 2%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.
Final Judgment
BrightView falls short of our quality standards. After the recent drawdown, the stock trades at 14.9× forward price-to-earnings (or $13.27 per share). While this valuation is reasonable, we don’t see a big opportunity at the moment. There are better investments elsewhere. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Would Buy Instead of BrightView
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