Considering an Investment in Ferguson (FERG)? Read This!

Today we're going to take a closer look at large-cap Industrial company Ferguson, whose shares are currently trading at $149.39. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!

Ferguson's Valuation Is in Line With Its Sector Averages:

Ferguson plc distributes plumbing and heating products in the United States and Canada. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Ferguson has a trailing 12 month P/E ratio of 16.6 and a P/B ratio of 6.48.

When we divide Ferguson's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -3.11. Since it's negative, the company has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.

Wider Gross Margins Than the Industry Average of 21.94%:

2019-07-31 2020-07-31 2021-07-31 2022-07-31
Revenue (MM) $22,010 $21,819 $22,792 $28,566
Gross Margins 29.3% 29.4% 30.6% 30.6%
Operating Margins 6.4% 7.0% 9.0% 9.9%
Net Margins 5.03% 4.4% 6.62% 7.43%
Net Income (MM) $1,108 $961 $1,508 $2,122
Net Interest Expense (MM) -74 -144 -144 -111
Net Interest Expense (MM) -$74 -$144 -$144 -$111
Depreciation & Amort. (MM) -$288 -$602 -$563 -$301
Earnings Per Share $4.78 $4.24 $6.55 $9.0
EPS Growth n/a -11.3% 54.48% 37.4%
Diluted Shares (MM) 232 225 225 205
Free Cash Flow (MM) $872 $1,566 $1,295 $859
Capital Expenditures (MM) -$418 -$302 -$246 -$290
Net Current Assets (MM) $159 -$1,008 -$571 -$1,445
Current Ratio 1.72 1.7 1.67 1.65
Long Term Debt (MM) $2,292 $2,635 $2,528 $3,679
Net Debt / EBITDA 0.7 0.66 0.67 1.21

Ferguson has growing revenues and decreasing reinvestment in the business, wider gross margins than its peer group, and average operating margins with a positive growth rate. The company also benefits from a strong EPS growth trend, consistent free cash flow, and healthy leverage. Furthermore, Ferguson has a decent current ratio.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.