Over the past six months, Brink's has been a great trade, beating the S&P 500 by 12.9%. Its stock price has climbed to $109.95, representing a healthy 19.3% increase. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Brink's, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Brink's Not Exciting?
Despite the momentum, we're cautious about Brink's. Here are three reasons why BCO doesn't excite us 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. Brink’s recent performance shows its demand has slowed as its annualized revenue growth of 3.5% over the last two years was below its five-year trend. 
2. 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, Brink’s margin dropped by 1.1 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Brink’s free cash flow margin for the trailing 12 months was 6.9%.
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? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Brink's historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 14%, somewhat low compared to the best business services companies that consistently pump out 25%+.
Final Judgment
Brink’s business quality ultimately falls short of our standards. With its shares outperforming the market lately, the stock trades at 13.7× forward P/E (or $109.95 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.
Stocks We Would Buy Instead of Brink's
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