W.W. Grainger, Inc. (NYSE: GWW)

Sector: Industrials Industry: Industrial Distribution CIK: 0000277135
Market Cap 79.03 Bn
P/B 23.49
P/E 100.02
P/S 8.17
ROIC (Qtr) 24.86
Div Yield % 0.54
Rev 1y % (Qtr) 6.13
Total Debt (Qtr) 2.72 Bn
Debt/Equity (Qtr) 0.76
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About

W.W. Grainger, Inc., often referred to as Grainger, operates as a broad-line, industrial distributor of maintenance, repair, and operating (MRO) products and services. Its primary operations are based in North America, Japan, and the United Kingdom (SEC Filing). The company's strategic framework, known as "The Grainger Edge," outlines its purpose, customer service approach, and teamwork methodologies. Grainger's operations are divided into two reportable segments: High-Touch Solutions North America (High-Touch Solutions N.A.) and Endless Assortment....

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Investment thesis

Bull case

  • Strong operating cash flow of 2.05B provides robust 0.75x coverage of total debt 2.72B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 535M provide 6.86x coverage of short-term debt 78M, demonstrating strong liquidity position and minimal refinancing risk.
  • Strong tangible asset base of 8.22B provides 3.02x coverage of total debt 2.72B, indicating robust asset backing and low credit risk.
  • Operating cash flow of 2.05B provides exceptional 21.33x coverage of minority interest expenses 96M, showing strong core operations.
  • Operating cash flow of 2.05B provides exceptional 26.26x coverage of interest expenses 78M, showing strong debt service capability.

Bear case

  • Operating cash flow of 2.05B barely covers its investment activities of (801M), with a coverage ratio of -2.56, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • With cash reserves of 535M against inventory of 2.27B, the 0.24 cash-to-inventory ratio suggests potential liquidity risks if inventory turnover slows, particularly concerning given current supply chain volatilities.
  • Operating cash flow of 2.05B provides thin coverage of dividend payments of (458M) with a -4.47 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 1.23B represents just -2.98x of debt issuance (414M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 14.62B provide limited buffer against comprehensive income items of (219M), which is -66.74x, indicating elevated exposure to market risks.

Segments Breakdown of Revenue (2024)

Geographical Breakdown of Revenue (2024)

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 8.95 2.41
EV to Cash from Ops. EV/CFO 85.36 40.73
EV to Debt EV to Debt 29.13 16.40
EV to EBIT EV/EBIT 61.41 18.05
EV to EBITDA EV/EBITDA 53.09 36.64
EV to Free Cash Flow [EV/FCF] EV/FCF 135.23 77.53
EV to Market Cap EV to Market Cap 1.00 1.51
EV to Revenue EV/Rev 8.19 2.64
Price to Book Value [P/B] P/B 23.49 8.70
Price to Earnings [P/E] P/E 100.02 55.05
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.78 49.20
Dividend Payout Ratio % Div Payout % (Qtr) 24.10 22.67
Dividend per Basic Share Div per Share (Qtr) 8.62 1.88
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 33.39 41.28
Interest Coverage Int. cover (Qtr) 30.95 35.27
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -94.27 -47.49
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -63.05 77.69
Dividend Growth (1y) % Div 1y % (Qtr) 10.23 6.21
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -5.49 -84.41
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -1.50 -13.74
EBIT Growth (1y) % EBIT 1y % (Qtr) -3.86 -33.83
EBT Growth (1y) % EBT 1y % (Qtr) -3.79 -41.73
EPS Growth (1y) % EPS 1y % (Qtr) -3.48 -109.80
FCF Growth (1y) % FCF 1y % (Qtr) -33.94 -14.68
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 4.42 1.31
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 2.01 1.45
Cash Payout Ratio Cash Payout (Qtr) 0.16 0.20
Cash Ratio Cash Ratio (Qtr) 0.27 0.34
Current Ratio Curr Ratio (Qtr) 2.72 2.47
Debt to Equity Ratio Debt/Equity (Qtr) 0.76 0.88
Interest Cover Ratio Int Coverage (Qtr) 30.95 35.27
Times Interest Earned Times Interest Earned (Qtr) 30.95 35.27
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 15.50 7.33
EBIT Margin % EBIT Margin % (Qtr) 13.60 5.34
EBT Margin % EBT Margin % (Qtr) 13.16 4.29
Gross Margin % Gross Margin % (Qtr) 39.10 28.45
Net Profit Margin % Net Margin % (Qtr) 9.70 2.59