FTD Group Competitive Moat Check (FTD)

This is one in a series of articles examining Joel Greenblatt's Magic Formula for picking value stocks. Today's stock: FTD Group (FTD).

I took a look at the five key metrics for FTD Group that determine whether a stock has a growing and sustainable competitive position, and they were not impressive. These factors are: (1) return on invested capital -- ROIC, (2) book value growth, (3) earnings per share growth, (4) sales growth, and (5) free cash flow growth, over the past five years.

FTD Group’s financials on ADVFN kind of look wilted. ROIC is currently negative and was also negative last year. Book value per share, however, has been increasing at a good pace over the past year. Until recently, earnings per share had been negative and revenue growth has been rather flat.

I don’t see a wide moat around FTD Group. The company does have a brand name, but I’m not so sure how loyal customers are to their brand. There are several national florist brand names that compete with them, including 1-800-Flowers (FLWS), ProFlowers of Provide Commerce (PRVD), and many others. I have used FTD a few times in the past for flowers, but I now prefer ProFlowers.

I would be very hesitant to automatically buy FTD Group if I followed the recommended mechanical investing method described in Joel Greenblatt’s The Little Book That Beats the Market. It will be interesting to see what happens to FTD over the coming year.