Kyndryl has gotten torched over the last six months - since June 2025, its stock price has dropped 33.9% to $27.26 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Kyndryl, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Is Kyndryl Not Exciting?
Even though the stock has become cheaper, we're cautious about Kyndryl. Here are three reasons why KD doesn't excite us and a stock we'd rather own.
1. Revenue Spiraling Downwards
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Kyndryl’s demand was weak and its revenue declined by 4.8% per year. This wasn’t a great result and signals it’s a lower quality business.
2. Breakeven Free Cash Flow 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.
Kyndryl broke even from a free cash flow perspective over the last five years, giving the company limited opportunities to return capital to shareholders.
3. Previous Growth Initiatives Have Lost Money
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).
Kyndryl’s five-year average ROIC was negative 13.5%, meaning management lost money while trying to expand the business. Its returns were among the worst in the business services sector.
Final Judgment
Kyndryl isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 8.2× forward P/E (or $27.26 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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