What a time it’s been for Lumen. In the past six months alone, the company’s stock price has increased by a massive 91.9%, reaching $7.64 per share. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now the time to buy Lumen, 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 Do We Think Lumen Will Underperform?

We’re glad investors have benefited from the price increase, but we're swiping left on Lumen for now. Here are three reasons there are better opportunities than LUMN and a stock we'd rather own.

1. Revenue Spiraling Downwards

Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Lumen struggled to consistently generate demand over the last five years as its sales dropped at a 9.5% annual rate. This wasn’t a great result and signals it’s a low quality business.

2. Free Cash Flow Margin Dropping

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

As you can see below, Lumen’s margin dropped by 6.6 percentage points over the last five years. Continued declines could signal it is in the middle of an investment cycle. Lumen’s free cash flow margin for the trailing 12 months was 12.9%.

3. New Investments Fail to Bear Fruit as ROIC Declines

ROIC, or return on invested capital, is a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Lumen’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Final Judgment

We see the value of companies helping their customers, but in the case of Lumen, we’re out. After the recent surge, the stock trades at 7.2× forward EV-to-EBITDA (or $7.64 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. We’d suggest looking at one of our top digital advertising picks.

Stocks We Like More Than Lumen

The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.