Ferguson Enterprises Inc. /DE/ (NYSE: FERG)

Sector: Industrials Industry: Industrial Distribution CIK: 0002011641
Market Cap 51.30 Bn
P/B 8.47
P/E 26.23
P/S 1.65
ROIC (Qtr) 18.19
Div Yield % 0.34
Rev 1y % (Qtr) 5.11
Total Debt (Qtr) 6.02 Bn
Debt/Equity (Qtr) 0.99
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About

Investment thesis

Bull case

  • Operating cash flow of 1.99B provides exceptional 10.49x coverage of interest expenses 190M, showing strong debt service capability.
  • Operating cash flow of 1.99B provides strong 24.60x coverage of stock compensation 81M, indicating sustainable incentive practices.
  • Robust free cash flow of 1.65B exceeds capital expenditure of 346M by 4.76x, indicating strong organic growth funding capability.
  • Robust tangible asset base of 14.53B provides 3.10x coverage of working capital 4.69B, indicating strong operational backing.
  • Tangible assets of 14.53B provide robust 10.30x coverage of other current liabilities 1.41B, indicating strong asset backing.

Bear case

  • Operating cash flow of 1.99B barely covers its investment activities of (576M), with a coverage ratio of -3.46, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 526M against inventory of 4.61B, the 0.11 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 1.99B provides thin coverage of dividend payments of (653M) with a -3.05 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 526M provide limited coverage of acquisition spending of (300M), which is -1.75x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Cash position of 526M provides weak coverage of payables of 3.47B, which is 0.15x, indicating potential working capital stress and supplier relationship risks.

Peer comparison

Companies in the Industrial Distribution
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 GWW W.W. Grainger, Inc. 79.03 Bn 100.02 8.17 2.72 Bn
2 FAST Fastenal Co 53.26 Bn 103.14 13.77 0.44 Bn
3 FERG Ferguson Enterprises Inc. /DE/ 51.30 Bn 26.23 1.65 6.02 Bn
4 WCC Wesco International Inc 14.66 Bn 22.69 0.62 6.53 Bn
5 WSO Watsco Inc 14.11 Bn 154.32 4.58 0.46 Bn
6 POOL Pool Corp 12.34 Bn 638.65 8.05 1.39 Bn
7 CNM Core & Main, Inc. 10.88 Bn 25.02 1.40 2.43 Bn
8 AIT Applied Industrial Technologies Inc 10.79 Bn 28.81 2.41 0.57 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 3.20 2.41
EV to Cash from Ops. EV/CFO 28.40 40.73
EV to Debt EV to Debt 9.40 16.40
EV to EBIT EV/EBIT 20.95 18.05
EV to EBITDA EV/EBITDA 18.32 36.64
EV to Free Cash Flow [EV/FCF] EV/FCF 34.36 77.53
EV to Market Cap EV to Market Cap 1.10 1.51
EV to Revenue EV/Rev 1.82 2.64
Price to Book Value [P/B] P/B 8.47 8.70
Price to Earnings [P/E] P/E 26.23 55.05
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.00 49.20
Dividend Payout Ratio % Div Payout % (Qtr) 33.50 22.67
Dividend per Basic Share Div per Share (Qtr) 3.32 1.88
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 39.55 41.28
Interest Coverage Int. cover (Qtr) 14.22 35.27
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 3.35 -47.49
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -12.48 77.69
Dividend Growth (1y) % Div 1y % (Qtr) 5.06 6.21
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 16.08 -84.41
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 5.68 -13.74
EBIT Growth (1y) % EBIT 1y % (Qtr) 4.81 -33.83
EBT Growth (1y) % EBT 1y % (Qtr) 4.76 -41.73
EPS Growth (1y) % EPS 1y % (Qtr) 18.71 -109.80
FCF Growth (1y) % FCF 1y % (Qtr) 26.40 -14.68
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 5.95 1.31
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.76 1.45
Cash Payout Ratio Cash Payout (Qtr) 0.28 0.20
Cash Ratio Cash Ratio (Qtr) 0.10 0.34
Current Ratio Curr Ratio (Qtr) 1.88 2.47
Debt to Equity Ratio Debt/Equity (Qtr) 0.99 0.88
Interest Cover Ratio Int Coverage (Qtr) 14.22 35.27
Times Interest Earned Times Interest Earned (Qtr) 14.22 35.27
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 9.90 7.33
EBIT Margin % EBIT Margin % (Qtr) 8.67 5.34
EBT Margin % EBT Margin % (Qtr) 8.06 4.29
Gross Margin % Gross Margin % (Qtr) 30.80 28.45
Net Profit Margin % Net Margin % (Qtr) 6.30 2.59