CDW Corp (NASDAQ: CDW)

Sector: Technology Industry: Information Technology Services CIK: 0001402057
Market Cap 18.25 Bn
P/B 7.19
P/E 17.36
P/S 0.83
ROIC (Qtr) 14.77
Div Yield % 2.26
Rev 1y % (Qtr) 4.00
Total Debt (Qtr) 5.76 Bn
Debt/Equity (Qtr) 2.27

About

CDW Corporation, known as CDW, operates in the technology sector, providing a wide range of IT solutions to various clients including businesses, government agencies, education, and healthcare institutions across the United States, the United Kingdom, and Canada. CDW's primary business activities involve the sale of products and services from over 1,000 vendor partners such as Adobe, Apple, Cisco, Dell EMC, Google, HP, IBM, Intel, Lenovo, Microsoft, NetApp, Nutanix, Palo Alto Networks, Pure Storage, Samsung, and VMware. Their product offerings...

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Price action

Investment thesis

Bull case

  • Healthy cash reserves of 452.90M provide 49.77x coverage of short-term debt 9.10M, demonstrating strong liquidity position and minimal refinancing risk.
  • Robust free cash flow of 1.01B exceeds capital expenditure of 107.80M by 9.36x, indicating strong organic growth funding capability.
  • Operating cash flow of 1.12B provides strong 13.14x coverage of stock compensation 85M, indicating sustainable incentive practices.
  • Tangible assets of 9.33B provide exceptional 19.56x coverage of deferred revenue 477M, showing strong service capability backing.
  • Tangible assets of 9.33B provide robust 21.97x coverage of other current liabilities 424.60M, indicating strong asset backing.

Bear case

  • Operating cash flow of 1.12B barely covers its investment activities of (229M), with a coverage ratio of -4.88, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 1.12B provides thin coverage of dividend payments of (330M) with a -3.38 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 452.90M provide limited coverage of acquisition spending of (328.70M), which is -1.38x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • High receivables of 6.40B relative to inventory of 504.70M (12.68 ratio) suggests aggressive credit terms or collection difficulties, potentially masking revenue quality issues.
  • Free cash flow of 1.01B represents just -2.47x of debt issuance (408.20M), suggesting concerning reliance on leverage rather than internal cash generation for growth.

Peer comparison

Companies in the Information Technology Services
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 IBM International Business Machines Corp 279.99 Bn 35.41 4.28 66.57 Bn
2 ACN Accenture plc 168.17 Bn 22.09 2.38 8.20 Bn
3 INFY Infosys Ltd 74.96 Bn 23.74 3.89 -
4 CTSH Cognizant Technology Solutions Corp 41.45 Bn 19.48 1.99 1.17 Bn
5 FIS Fidelity National Information Services, Inc. 35.21 Bn 231.62 3.36 13.00 Bn
6 WIT Wipro Ltd 29.93 Bn 19.70 2.97 1.95 Bn
7 BR Broadridge Financial Solutions, Inc. 26.38 Bn 28.51 3.74 3.28 Bn
8 LDOS Leidos Holdings, Inc. 23.72 Bn 16.88 1.37 5.23 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 1.55 1.44
EV to Cash from Ops. EV/CFO 21.08 5.63
EV to Debt EV to Debt 4.09 8.06
EV to EBIT EV/EBIT 14.40 -4.05
EV to EBITDA EV/EBITDA 12.23 -0.52
EV to Free Cash Flow [EV/FCF] EV/FCF 23.33 -1.66
EV to Market Cap EV to Market Cap 1.29 1.35
EV to Revenue EV/Rev 1.07 57.14
Price to Book Value [P/B] P/B 7.19 3.34
Price to Earnings [P/E] P/E 17.36 -5.47
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.19 -0.83
Dividend Payout Ratio % Div Payout % (Qtr) 31.40 0.66
Dividend per Basic Share Div per Share (Qtr) 2.50 0.47
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 32.46 6.24
Interest Coverage Int. cover (Qtr) 7.25 -319.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 15.45 -253.62
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -52.16 114.15
Dividend Growth (1y) % Div 1y % (Qtr) 0.81 35.23
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -3.97 -22.49
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -1.39 -25.03
EBIT Growth (1y) % EBIT 1y % (Qtr) -2.43 -82.44
EBT Growth (1y) % EBT 1y % (Qtr) -3.74 97.07
EPS Growth (1y) % EPS 1y % (Qtr) -3.74 147.29
FCF Growth (1y) % FCF 1y % (Qtr) -24.77 -8,638.64
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 3.77 -8.24
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.45 0.78
Cash Payout Ratio Cash Payout (Qtr) 0.27 0.01
Cash Ratio Cash Ratio (Qtr) 0.08 0.66
Current Ratio Curr Ratio (Qtr) 1.39 2.12
Debt to Equity Ratio Debt/Equity (Qtr) 2.27 0.88
Interest Cover Ratio Int Coverage (Qtr) 7.25 -319.17
Times Interest Earned Times Interest Earned (Qtr) 7.25 -319.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 8.70 -550.76
EBIT Margin % EBIT Margin % (Qtr) 7.40 -775.74
EBT Margin % EBT Margin % (Qtr) 6.38 -827.89
Gross Margin % Gross Margin % (Qtr) 21.60 24.07
Net Profit Margin % Net Margin % (Qtr) 4.80 -830.34