Ferguson Enterprises Inc. /DE/ (FERG) Stock Analysis
Ferguson Enterprises Inc. /DE/ (FERG) Stock Analysis
Overall Grade: F (Concerning)
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Ferguson Enterprises Inc. /DE/ faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 19.6% | Solid returns |
| FCF Margin | 5.3% | Healthy cash flow |
| Debt/Equity | 0.7x | Moderate leverage |
Investment Thesis: Strong return on invested capital of 19.6% suggests durable competitive advantages and efficient capital allocation.
What is Ferguson Enterprises Inc. /DE/'s Profitability and ROIC?
Ferguson Enterprises Inc. /DE/ generates strong returns on invested capital at 19.6%, indicating efficient capital allocation and competitive advantages. Gross margin of 30.8% with operating margin at 8.7% reflects the company's moderate market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 19.6% | Good | Strong capital efficiency |
| Return on Equity (ROE) | 34.5% | Excellent | Efficient use of shareholder equity |
| Gross Margin | 30.8% | Good | Competitive pricing environment |
| Operating Margin | 8.7% | Adequate | Moderate operational efficiency |
How Strong is Ferguson Enterprises Inc. /DE/'s Cash Flow Quality?
Ferguson Enterprises Inc. /DE/ generated $1.6B in free cash flow over the trailing twelve months, representing a 5.3% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 1.0x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 5.3% | Adequate | Healthy cash generation |
| Free Cash Flow (TTM) | $1.6B | Good | Positive cash generation |
| OCF/Net Income | 1.0x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is Ferguson Enterprises Inc. /DE/'s Financial Health?
Ferguson Enterprises Inc. /DE/'s debt-to-equity ratio of 0.7x indicates conservative leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 0.7x | Good | Moderate leverage |
| Net Cash Position | $-3.6B | Warning | Net debt position |
Is Ferguson Enterprises Inc. /DE/ Stock Overvalued or Undervalued?
Ferguson Enterprises Inc. /DE/ trades at a P/E of 25.1x, representing a premium to the sector median of N/A. Free cash flow yield of 3.3% reflects market expectations for growth.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 25.1x | Adequate | Premium valuation |
| EV/Sales | 1.4x | Excellent | Attractive revenue multiple |
| FCF Yield | 3.3% | Adequate | Lower cash yield |
| Dividend Yield | 1.3% | Adequate | Growth focus over income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 19.6% | Top 25% | 4.6x above |
| Free Cash Flow Margin | 5.3% | Top 50% | - |
| Gross Margin | 30.8% | Bottom 50% | 1.0x below |
| Operating Margin | 8.7% | Top 50% | 1.5x above |
| Return on Equity (ROE) | 34.5% | Top 5% | 4.2x above |
| P/E Ratio | 25.1x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 19.6% (Good - Top 25% of sector (median: 4.3%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 5.3% (Adequate - Top 50% of sector (median: 0.0%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 30.8% (Good - Bottom 50% of sector (median: 31.2%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 68.1% (Good)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 25.1x (Adequate)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 3.3% (Adequate)
Frequently Asked Questions
Q: What is Ferguson Enterprises Inc. /DE/'s Return on Invested Capital (ROIC)?
Ferguson Enterprises Inc. /DE/ (FERG) has a trailing twelve-month Return on Invested Capital (ROIC) of 19.6%. This compares above the sector median of 4.3%. An ROIC between 12-20% indicates solid capital allocation and sustainable competitive position.
Q: What is Ferguson Enterprises Inc. /DE/'s Free Cash Flow Margin?
Ferguson Enterprises Inc. /DE/ (FERG) has a free cash flow margin of 5.3%, generating $1.6 billion in free cash flow over the trailing twelve months. A FCF margin between 5-10% is typical for capital-intensive businesses.
Q: Is Ferguson Enterprises Inc. /DE/ stock overvalued or undervalued?
Ferguson Enterprises Inc. /DE/ (FERG) trades at a P/E ratio of 25.1x, which is above the sector median of N/A. The EV/Sales multiple is 1.4x. Free cash flow yield is 3.3%, which is in line with market averages.
Q: Does Ferguson Enterprises Inc. /DE/ pay a dividend?
Ferguson Enterprises Inc. /DE/ (FERG) currently pays a dividend yield of 1.3%. Including share buybacks, the total shareholder yield is 3.2%. The relatively low yield suggests the company prioritizes growth reinvestment over income distribution.
Q: How much debt does Ferguson Enterprises Inc. /DE/ have?
Ferguson Enterprises Inc. /DE/ (FERG) has a debt-to-equity ratio of 0.7x with total debt of $4.1 billion. Net debt position is $3.6 billion.
Q: What is Ferguson Enterprises Inc. /DE/'s revenue and earnings growth?
Ferguson Enterprises Inc. /DE/ (FERG) grew revenue by 4.9% year-over-year. Earnings per share increased by 18.7% compared to the prior year. Modest growth indicates a mature business with stable demand.
Q: Is Ferguson Enterprises Inc. /DE/ buying back stock?
Ferguson Enterprises Inc. /DE/ (FERG) repurchased $900.0 million of stock over the trailing twelve months. This represents a buyback yield of 1.8%.
Q: How does Ferguson Enterprises Inc. /DE/ compare to competitors in Other?
Compared to other companies in Other, Ferguson Enterprises Inc. /DE/ (FERG) shows: ROIC of 19.6% is above the sector median of 4.3% (Top 14%). FCF margin of 5.3% exceeds the sector median of 0.0% (Top 33% of sector). Gross margin at 30.8% is 0.3 percentage points lower than sector peers. These rankings are based on MetricDuck's analysis of all Other companies with available SEC filings.
Q: What warning signs should I watch for with Ferguson Enterprises Inc. /DE/?
Investors in Ferguson Enterprises Inc. /DE/ (FERG) should monitor these potential warning signs: 1) ROIC has been declining, potentially signaling deteriorating competitive position. Regular monitoring of SEC filings and quarterly trends is recommended.
Data Source: Data sourced from 10-Q filed 2025-12-09. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.