FTDR

We rate Frontdoor, Inc. (FTDR) as a Hold with a composite score of 60.1/100 at a current price of $55.57. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (76th percentile) and momentum (70th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (25th percentile) and value (67th percentile) tempers our overall conviction. We assign a Narrow Moat rating (55/100), High uncertainty, and Standard capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Frontdoor, Inc. holds a top-quartile position (#0 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 60.1/100 places it at rank #689 in our full 7,333-stock universe. At $4.9B in market capitalization, Frontdoor, Inc. is a mid-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The outlook is moderately positive, with revenue expanding at 14% and favorable momentum (70th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 57% (-2.9pp vs sector) narrow to operating margins of 21% (+17.2pp vs sector) and net margins of 15.6%, yielding a gross-to-net conversion rate of 28%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $55.57, Frontdoor, Inc. is trading near fair value based on current fundamentals. Our value factor score of 67/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 11.5x (a 52% discount to the sector median of 23.7x), EV/EBITDA of 9.6x (near the sector median), P/B of 12.8x, P/S of 1.8x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a High uncertainty rating to Frontdoor, Inc.. Key risk factors include significant leverage (373% debt-to-equity). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (373% debt-to-equity). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 76th percentile and quality factor at the 70th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 57% provide a buffer against cost pressures; above-average stability (76th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Frontdoor, Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 112.0%, and the balance sheet is managed within acceptable parameters (D/E: 373%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Frontdoor, Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Frontdoor, Inc. receives a Hold rating with a composite score of 60.1/100 (rank #689 of 7,333). Our quantitative framework assigns a Narrow Moat (55/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 62/100.

Our analysis supports a neutral stance on Frontdoor, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.