Frontdoor stock returned 19.4% over the past twelve months, outpacing the 17.3% return for the S&P 500, as the company continued to shrink its share count while sales growth decelerated. The home warranty provider has retired enough shares to leave it with 13.1% fewer outstanding than three years ago, a move that increases the ownership stake of remaining shareholders and boosts earnings per share relative to net income.
Frontdoor's net income rose 28.9% a year over the last three years, while earnings per share rose 34.4% a year. This 5.5-point annual gap reflects the company cutting its share count by more than 4% in each of the last two years. Frontdoor spent $300 million on buybacks over the last twelve months, which equals 4.8% of its market value after subtracting the $38 million paid to employees in stock.
The company funds these repurchases with cash from its home warranty business, which serves 2.1 million members with a 79.6% retention rate in the second quarter of 2026. Capital spending consumed only 6% of Frontdoor's operating cash flow over the last twelve months, resulting in $386 million in free cash flow. This figure is 1.29 times the amount spent on buybacks. Frontdoor's operating margin also expanded to 19.8% over the last twelve months, up from 12.7% three years ago.
Management stated on an August 6, 2026 call that it expects to buy back about $330 million of stock in 2026. The company raised its 2026 revenue forecast to $2.20 billion at the midpoint, up from $2.17 billion. However, reported revenue growth has slowed in each of the last three quarters, dropping to 4.7% in the second quarter of 2026 from 14.0% in the third quarter of 2025.
Part of this slowdown reflects the 2-10 acquisition dropping out of year-ago comparisons, while existing home sales remain sluggish and are expected to finish around 4 million homes for a fourth straight year. Despite these headwinds, management noted that total members grew organically for the first time in five years.
Frontdoor currently trades at 19.9 times earnings, a modest discount to the S&P 500's multiple of 21.9. The company operates with net debt equal to 1.0 times its EBITDA, and its operating profit covers interest 5.4 times. Management expects to convert more than 60% of adjusted EBITDA into free cash flow in 2026, with a forecast adjusted EBITDA of $592.5 million at the midpoint translating to more than $355 million in free cash flow.
The ability of this free cash flow to cover the roughly $330 million buyback plan will be a key metric when Frontdoor reports third-quarter results, expected on or around November 5, 2026.