Why Frontdoor Stock Deserves To Be In Your Portfolio

Frontdoor (FTDR) stock returned 19.4% over the past twelve months, outpacing the 17.3% return for the S&P 500. The home warranty company has also been buying back its own stock, leaving it with 13.1% fewer shares today than three years ago. By retiring those shares, the company increases the ownership stake of every remaining shareholder. So how much faster have earnings grown for each share than for the company as a whole?

Frontdoor Shareholders Got A Larger Slice Of Profit

Earnings for each share grew about 5.5 points a year faster than the company's. Frontdoor's net income rose 28.9% a year over the last three years, while earnings per share rose 34.4% a year. That gap reflects a shrinking share count, which Frontdoor cut by more than 4% in each of the last two years.

The buybacks continue at that pace. Frontdoor spent $300 million on them over the last twelve months. After subtracting the $38 million it paid employees in stock, those buybacks equal 4.8% of its market value.

However, a larger ownership slice is only worth what the market is willing to pay. Frontdoor trades at 19.9 times earnings, compared to 21.9 for the S&P 500. That is a modest discount to the index.

Home Warranty Members Supply Frontdoor's Cash

Frontdoor funds these buybacks with cash generated by its home warranty business. The company sells repair plans to 2.1 million members, and its retention rate was 79.6% in the second quarter of 2026.

Only a fraction of that cash needs to be reinvested in the business. Capital spending took only 6% of Frontdoor's operating cash flow over the last twelve months, leaving most of it free to return. Free cash flow reached $386 million, or 1.29 times what Frontdoor spent on buybacks.

Frontdoor also retains more of every sales dollar than it previously did. Its operating margin was 19.8% over the last twelve months, up from 12.7% three years ago.

Can Frontdoor Afford Its Repurchases As Sales Growth Slows?

So far, the company can. Frontdoor's net debt equals 1.0 times its EBITDA, and its operating profit covers interest 5.4 times. Management stated on the August 6, 2026 call that it expects to buy back about $330 million of stock in 2026. The company also raised its 2026 revenue forecast to $2.20 billion at the midpoint, up from $2.17 billion.

The concern is slowing sales growth. Reported revenue growth has slowed in each of the last three quarters, to 4.7% in the second quarter of 2026 from 14.0% in the third quarter of 2025. Part of that slowdown reflects the 2-10 acquisition dropping out of the year-ago comparison. Frontdoor also sells some warranties alongside home sales, and management noted that existing home sales remain sluggish. That market is expected to finish around 4 million homes for a fourth straight year. Even so, management said total members grew organically for the first time in five years.

Can Frontdoor's Cash Cover Its 2026 Buybacks?

Frontdoor operates with net debt, and over the last twelve months it funded buybacks using free cash flow. Management said on the same call that it expects to turn more than 60% of adjusted EBITDA into free cash flow in 2026. Its 2026 adjusted EBITDA forecast sits at $592.5 million at the midpoint, which translates to more than $355 million of free cash flow.

That free cash flow, measured against the roughly $330 million buyback plan, will be the key metric to watch when Frontdoor reports third-quarter results, expected on or around November 5, 2026.

How To Act On FTDR?

Now you know FTDR better. And that's our purpose: to make you informed before you invest your money. However, making a bet on a single stock carries its own risks.

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