Over the past six months, JLL has been a great trade, beating the S&P 500 by 15.9%. Its stock price has climbed to $257.99, representing a healthy 25.6% increase. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now the time to buy JLL, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

We’re glad investors have benefited from the price increase, but we don't have much confidence in JLL. Here are three reasons why JLL doesn't excite us and a stock we'd rather own.

Why Do We Think JLL Will Underperform?

Founded in 1999 through the merger of Jones Lang Wootton and LaSalle Partners, JLL (NYSE:JLL) is a company specializing in real estate advisory and investment management services.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, JLL’s sales grew at a sluggish 5.2% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector.

2. Mediocre Free Cash Flow Margin Limits Reinvestment Potential

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.

JLL has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 1.5%, lousy for a consumer discretionary business.

3. Previous Growth Initiatives Haven’t Paid Off Yet

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).

JLL historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 7.8%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

Final Judgment

JLL doesn’t pass our quality test. With its shares outperforming the market lately, the stock trades at 17× forward price-to-earnings (or $257.99 per share). This valuation tells us a lot of optimism is priced in - you can find better investment opportunities elsewhere. We’d suggest looking at Costco, one of Charlie Munger’s all-time favorite businesses.

Stocks We Would Buy Instead of JLL

With rates dropping, inflation stabilizing, and the elections in the rearview mirror, all signs point to the start of a new bull run - and we’re laser-focused on finding the best stocks for this upcoming cycle.

Put yourself in the driver’s seat by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,691% between September 2019 and September 2024) as well as under-the-radar businesses like United Rentals (+550% five-year return). Find your next big winner with StockStory today for free.