FERGUSON ENTERPRISES INC (NYSE:FERG) – A Quality Stock with Strong Fundamentals

FERGUSON ENTERPRISES INC (NYSE:FERG) was identified by our Caviar Cruise stock screener as a potential candidate for quality investors. The company demonstrates strong historical growth, high profitability, and efficient capital allocation, making it worth a closer look for long-term investors.

Key Strengths of FERG

• Revenue & EBIT Growth: Over the past five years, FERG has delivered solid revenue growth at a 7.54% CAGR, while EBIT growth has been even stronger at 12.13%. This indicates improving operational efficiency and pricing power.
• High ROIC: The company’s Return on Invested Capital (excluding cash and goodwill) stands at 24.8%, well above our 15% threshold, signaling effective capital deployment.
• Strong Profit Quality: With a five-year average Profit Quality of 91.3%, FERG converts nearly all its net income into free cash flow, a sign of financial health.
• Manageable Debt: The Debt-to-Free Cash Flow ratio of 2.95 suggests the company could repay its debt in under three years using current cash flows, reflecting a conservative balance sheet.

Fundamental Analysis Summary

Our fundamental report rates FERG 5 out of 10, with strengths in profitability and financial health but some concerns on valuation. Key takeaways:

• Profitability: Scores 8/10, with high ROIC (16.68%) and improving margins.
• Financial Health: Scores 5/10, with a strong Altman-Z score (5.23) but weaker liquidity metrics.
• Valuation: Currently expensive with a P/E of 23.09, though justified by strong profitability.
• Growth: Expected EPS growth of 8.2% annually, supported by a 7.54% revenue growth forecast.

For investors seeking quality companies with durable competitive advantages, FERG’s consistent growth and high returns make it a compelling candidate.

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Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own analysis before making investment decisions.