Dun & Bradstreet’s stock price has taken a beating over the past six months, shedding 25.9% of its value and falling to $9.08 per share. This might have investors contemplating their next move.
Is there a buying opportunity in Dun & Bradstreet, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Dun & Bradstreet Will Underperform?
Even though the stock has become cheaper, we're swiping left on Dun & Bradstreet for now. Here are three reasons why there are better opportunities than DNB and a stock we'd rather own.
1. Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within business services, a stretched historical view may miss recent innovations or disruptive industry trends. Dun & Bradstreet’s recent performance shows its demand has slowed as its annualized revenue growth of 3.7% over the last two years was below its five-year trend. 
2. Shrinking Adjusted Operating Margin
Adjusted operating margin is a key measure of profitability. Think of it as net income (the bottom line) excluding the impact of non-recurring expenses, taxes, and interest on debt - metrics less connected to business fundamentals.
Analyzing the trend in its profitability, Dun & Bradstreet’s adjusted operating margin decreased by 5 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Its adjusted operating margin for the trailing 12 months was 32.7%.
3. 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.
Dun & Bradstreet’s full-year EPS was flat over the last four years, worse than the broader business services sector.
Final Judgment
We cheer for all companies making their customers lives easier, but in the case of Dun & Bradstreet, we’ll be cheering from the sidelines. After the recent drawdown, the stock trades at 8.5× forward P/E (or $9.08 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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