FERGUSON ENTERPRISES INC (NYSE:FERG) – A Quality Stock Worth Considering

FERGUSON ENTERPRISES INC (NYSE:FERG) was identified by our Caviar Cruise stock screener as a potential candidate for quality investors. The company, a leading distributor of plumbing and HVAC products, demonstrates strong financial metrics that align with the principles of quality investing.

Key Strengths of FERG

• Revenue and EBIT Growth: Over the past five years, FERG has delivered solid revenue growth of 7.54% annually, while EBIT growth has been even stronger at 12.13%, indicating improving profitability.
• High ROIC: The company’s Return on Invested Capital (excluding cash and goodwill) stands at 24.80%, well above the 15% threshold for quality stocks, reflecting efficient capital allocation.
• Strong Profit Quality: FERG converts 91.33% of its net income into free cash flow, demonstrating high earnings quality and financial stability.
• Manageable Debt: With a Debt-to-Free Cash Flow ratio of 2.95, the company could repay its debt in less than three years using current cash flows, signaling a healthy balance sheet.

Fundamental Analysis Summary

FERG earns a 5 out of 10 in our fundamental rating, placing it in the middle of its industry peers. While the company excels in profitability—ranking among the top in ROIC and margins—its valuation appears somewhat expensive. Analysts expect continued revenue growth of 7.54% annually, though earnings growth may slow slightly.

Why Quality Investors Might Consider FERG

FERG’s consistent revenue and profit growth, high ROIC, and strong cash flow generation make it a candidate for long-term investors focused on durable businesses. While the stock is not cheap, its financial health and industry positioning justify further research.

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Disclaimer

This is not investing advice. Always conduct your own research before making investment decisions.