TD SYNNEX has been treading water for the past six months, recording a small loss of 3.4% while holding steady at $114.44.

Is there a buying opportunity in TD SYNNEX, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is TD SYNNEX Not Exciting?

We don't have much confidence in TD SYNNEX. Here are three reasons why SNX doesn't excite us and a stock we'd rather own.

1. Revenue Tumbling Downwards

Long-term growth is the most important, but within business services, a stretched historical view may miss new innovations or demand cycles. TD SYNNEX’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.4% over the last two years.

2. EPS Growth Has Stalled

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

TD SYNNEX’s flat EPS over the last five years was below its 21.2% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

3. Free Cash Flow Margin Dropping

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.

As you can see below, TD SYNNEX’s margin dropped by 8.1 percentage points over the last five years. Almost any movement in the wrong direction is undesirable because of its already low cash conversion. If the trend continues, it could signal it’s becoming a more capital-intensive business. TD SYNNEX’s free cash flow margin for the trailing 12 months was breakeven.

Final Judgment

TD SYNNEX isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 8.6× forward P/E (or $114.44 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at the most entrenched endpoint security platform on the market.

Stocks We Would Buy Instead of TD SYNNEX

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