Cadre currently trades at $38.19 per share and has shown little upside over the past six months, posting a middling return of 0.6%. The stock also fell short of the S&P 500’s 8.1% gain during that period.

Is now the time to buy Cadre, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

We're swiping left on Cadre for now. Here are three reasons why you should be careful with CDRE and a stock we'd rather own.

Why Is Cadre Not Exciting?

Originally known as Safariland, Cadre (NYSE:CDRE) specializes in manufacturing and distributing safety and survivability equipment for first responders.

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. Unfortunately, Cadre’s 7.2% annualized revenue growth over the last four years was mediocre. This was below our standard for the industrials sector.

2. Free Cash Flow Margin Dropping

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Cadre’s margin dropped by 7.2 percentage points over the last five years. If its declines continue, it could signal higher capital intensity. Cadre’s free cash flow margin for the trailing 12 months was 5.5%.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We typically prefer to invest in companies with high returns because it means they have viable business models, but the trend in a company’s ROIC is often what surprises the market and moves the stock price. Unfortunately, Cadre’s ROIC has decreased over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

Cadre isn’t a terrible business, but it doesn’t pass our quality test. With its shares underperforming the market lately, the stock trades at 26× forward price-to-earnings (or $38.19 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward KLA Corporation, a picks and shovels play for semiconductor manufacturing.

Stocks We Like More Than Cadre

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