Think Kyndryl Holdings is Expensive? This Chart Might Change Your Mind.

Source The Motley Fool

Kyndryl Holdings (NYSE: KD) looks like an expensive stock. The IT infrastructure specialist trades at 61 times GAAP earnings, and its free cash flows have been negative across the past four quarters. That's a lofty price-to-earnings (P/E) ratio, and many value investors will just walk away from Kyndryl's recent cash consumption habits.

But then you're missing the big picture. Kyndryl's separation from former parent company IBM (NYSE: IBM) left the company with lots of low-margin client contracts, resulting in poor profit margin. The company has been busy restructuring its deals, boosting the profitability of about half its inherited long-term revenue streams in the first three years of standalone operations.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Kyndryl's financial makeover

That ratio should rise to 90% renegotiated deals by fiscal year 2028. Free cash flow is expected to reach $300 million in 2025, and then triple over the next three years. By then, the sliding top-line revenue should stabilize at mid-single-digit annual growth, setting Kyndryl up to be a shareholder-friendly cash machine with generous buybacks and perhaps a decent dividend, too.

Here's how Kyndryl's management likes to visualize these "triple, double, single" ambitions:

Chart showing Kyndryl's estimated 2025 and 2028 profits.

Image source: Kyndryl Holdings Q3 2025 earnings presentation.

It all starts with a bit of fancy financial engineering. That's par for the course, since CEO Martin Schroeter spent 13 years in high-level financial management roles at IBM. Backing away from unprofitable service contracts resulted in falling sales, but it will also generate richer profit margin and direct profit over time.

Exploring Kyndryl's valuation from a future perspective

Kyndryl's stock doesn't look expensive anymore when you account for the company's long-term profit growth. If the company reaches its $1 billion target for free cash flows in 2028 and the stock stayed flat, Kyndryl would be worth just eight times those estimated 2028 cash flows. The stock price could double from here and still look affordable next to IT management services rivals such as Accenture (NYSE: ACN) and WiPro (NYSE: WIT).

So Kyndryl's stock isn't as expensive as it seems. The company is restructuring its order book on a fundamental level, setting investors up for solid long-term returns.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

  • Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $295,009!*
  • Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,000!*
  • Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $523,463!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

Continue »

*Stock Advisor returns as of March 24, 2025

Anders Bylund has positions in International Business Machines. The Motley Fool has positions in and recommends Accenture Plc, International Business Machines, and Kyndryl. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Solana (SOL) Faces Continued Downside Risk—More Losses LikelySolana started a fresh decline from the $155 zone. SOL price is now consolidating near $145 and might extend losses below the $142 support.
Author  NewsBTC
May 06, Tue
Solana started a fresh decline from the $155 zone. SOL price is now consolidating near $145 and might extend losses below the $142 support.
placeholder
Analysts Highlight 4 Reasons Why ETH Price Could Rebound Strongly in MayEthereum (ETH) has declined for five consecutive months. However, it enters May with rising optimism.
Author  Beincrypto
May 07, Wed
Ethereum (ETH) has declined for five consecutive months. However, it enters May with rising optimism.
placeholder
Ethereum Price Ready to Surge—$2,000 Level Could Be Within ReachEthereum price started a fresh increase above the $1,800 zone. ETH is now rising and attempting a move above the $1,850 resistance. Ethereum started a fresh recovery wave above the $1,820 resistance.
Author  NewsBTC
23 hours ago
Ethereum price started a fresh increase above the $1,800 zone. ETH is now rising and attempting a move above the $1,850 resistance. Ethereum started a fresh recovery wave above the $1,820 resistance.
placeholder
Sui Price Forecast: SUI bulls aim for 15% gains as open interest and bullish bets increase among tradersSui (SUI) price extends recent gains, soaring10% higher at the time of writing on Thursday and approaching its key resistance level at $3.65.
Author  FXStreet
18 hours ago
Sui (SUI) price extends recent gains, soaring10% higher at the time of writing on Thursday and approaching its key resistance level at $3.65.
placeholder
Ethereum To ‘Witness Big Breakout’ In The Next Two Weeks If This Level HoldsAs price continues to trade sideways, Ethereum (ETH) has reclaimed a crucial level, which could kickstart a breakout toward the $2,100 resistance.
Author  NewsBTC
18 hours ago
As price continues to trade sideways, Ethereum (ETH) has reclaimed a crucial level, which could kickstart a breakout toward the $2,100 resistance.
goTop
quote