What a fantastic six months it’s been for Janus. Shares of the company have skyrocketed 52.9%, hitting $9.68. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is now the time to buy Janus, 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 for active Edge members.
Why Is Janus Not Exciting?
We’re happy investors have made money, but we're swiping left on Janus for now. Here are three reasons we avoid JBI and a stock we'd rather own.
1. Core Business Falling Behind as Demand Declines
We can better understand Commercial Building Products companies by analyzing their organic revenue. This metric gives visibility into Janus’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Janus’s organic revenue averaged 1.8% year-on-year declines. This performance was underwhelming and implies it may need to improve its products, pricing, or go-to-market strategy. It also suggests Janus might have to lean into acquisitions to grow, which isn’t ideal because M&A can be expensive and risky (integrations often disrupt focus). 
2. Projected Revenue Growth Shows Limited Upside
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Janus’s revenue to stall. Although this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.
3. EPS Trending Down
Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Janus’s full-year EPS dropped 47.5%, or 13.8% annually, over the last three years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Janus’s low margin of safety could leave its stock price susceptible to large downswings.
Final Judgment
Janus’s business quality ultimately falls short of our standards. After the recent surge, the stock trades at 12.8× forward P/E (or $9.68 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d suggest looking at the most dominant software business in the world.
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