Ferguson Enterprises Inc. (FERG): what the price requires
At today's price, Ferguson Enterprises Inc. (FERG) is priced for +17.8% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/FERG
Headline
| Field | Value |
|---|---|
| Ticker | FERG |
| Company | Ferguson Enterprises Inc. |
| Current price | $232.12/sh |
| Composition | US Residential 47% / US Commercial 33% / US Civil/Infrastructure 8% / US Industrial 6% / Canada 5% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 7.5% |
| Operating margin today | 8.2% |
| Margin compression implied | -0.7pp |
| Implied growth | 17.8% |
| Multiple paid | 20x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.4% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| cohort percentile (of 225 peers) | 44 |
| sustained it ~5 years at this level | 40% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 1.88x | 5 | expensive |
| Earnings | 2.28x | 4 | expensive |
| Relative | 0.65x | 5 | justifies |
| Growth | 0.98x | 3 | justifies |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.6%); the inversion above states its own rate.
Per-Model Detail (n=17)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $235.72 | 0.98x | yes | FCF base $2.2B, growth 7% (input: historical growth), terminal g 4.0%, WACC 8.6%, 5yr projection |
| DCF Exit Multiple | Growth | $239.17 | 0.97x | yes | Exit EV/EBITDA: 12.6x / 14.6x / 16.6x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $202.23 | 1.15x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 15.1x / 18.0x / 20.9x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $123.15 | 1.88x | yes | BV/sh $30.15, ROE (TTM) 37.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $271.59 | 0.85x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $186.65 | 1.24x | yes | Rev $32.3B, growth 7% (input: historical growth; tapered), Terminal P/S: 1.2x / 1.4x / 1.6x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $358.72 | 0.65x | yes | EPS $11.24, growth 32% (input: historical EPS growth), PEG=0.64 (Undervalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $0.03 | 7737.33x | yes | Normalized EBIT (latest-period EBIT; under 3y history) $0.61B × (1−26%) / WACC 8.6% → EPV (no growth) (excluded from median) |
| Residual Income | Asset | $193.71 | 1.20x | yes | BV $30.15 + 5yr PV of (ROE (TTM) 37.8% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $87.33 | 2.66x | yes | √(22.5 × EPS $11.24 × BVPS $30.15) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $185.58 | 1.25x | yes | EBITDA $3.45B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $87.76 | 2.64x | yes | FCF $2068.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $82.49 | 2.81x | yes | SBC-adj FCF $1.97B (FCF $2.07B − SBC $0.10B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $362.68 | 0.64x | yes | EPS $11.24 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $14.26 | 16.28x | yes | BV $30.15 × (ROIC 4.1% / WACC 8.6%) |
| P/Sales Sector | Relative | $414.76 | 0.56x | yes | Revenue $32.32B × sector P/S 2.5x |
| PEG Fair Value | Relative | $421.50 | 0.55x | yes | EPS $11.24 × (PEG 1.5 × growth 25.0% (input: historical EPS growth)) → PE 37.5x |
| Earnings Yield | Earnings | $121.51 | 1.91x | yes | EPS $11.24 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $3.5b |
| Net debt / NOPAT (after-tax) | 1.88x |
| Net debt / operating income (pre-tax) | 1.39x |
| Share count CAGR (buyback) | -2.0% |
| Burning cash | no |
Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.
Bullet Takeaways
At $238, the price pays about 21x company-wide operating income, which solves to roughly 19% annual operating-profit growth held for five years. That is a real demand, sitting in the upper part of what a mature distributor can plausibly sustain.
Ferguson is a scale distributor, not a manufacturer, so the right lens is volume and working-capital efficiency rather than book value. Return on equity near 38% and gross margin of 31% show a business that earns far more on its capital than the asset models can register.
March-quarter 2026 was a split read: net sales up 3.6% to $7.5 billion, adjusted EPS up 9.1% to $2.28, non-residential up 8% while residential fell 1%. The stock slipped on softer cash flow, and management held its full-year outlook rather than raising it.
Bull Case
Ferguson is best read as a mature distributor that has reached the scale where size itself is the moat, and that framing changes how the numbers should be read. The business serves customers in all 50 states with roughly 32,000 associates and same-day or next-day product availability, which the company calls a competitive strength (accession 0002011641-25-000027), and it buys from about 37,000 suppliers with none above 5% of inventory purchases (accession 0002011641-25-000027). That combination, a dense delivery network on one side and a fragmented supply base on the other, is what lets it take share in a still-fragmented market without owning factories. The result is a return on equity near 38% on a thin asset base, which is why the simple asset model at $123 badly understates the business.
The stage also explains the margin direction. In the March quarter gross margin rose 30 basis points to 31.0% even as revenue grew only 3.6%, so the bottom line outgrew the top: adjusted EPS rose 9.1% to $2.28. A mature distributor that can expand margin in a soft demand year is converting its scale into pricing and mix rather than chasing volume, and that is the more durable form of growth.
The market is paying for that durability without demanding heroics from the multiple. The relative-valuation method actually lands above today's price family at a sector P/E near 18x, the growth-DCF sits within 2% of the price at $235 (June 27, 2026), and the exit-multiple DCF clears it at $244. Against the distribution cohort of Avnet, TD Synnex, Arrow, Ingram Micro, and WESCO, Ferguson earns a premium return and a steadier end-market mix, and the methods that account for forward economics agree the price is fair rather than stretched.
Bear Case
The external variable with the most leverage here is the U.S. housing and construction cycle, and the price does not reflect how exposed it is. Residential and non-residential each make up roughly half of U.S. sales, and in the March quarter the residential half already shrank 1% while HVAC revenue slipped about 1%. The non-residential side carried the quarter at 8% growth, but that is the more cyclical, project-driven half, and it tends to roll over later and faster when financing tightens. A distributor with no product differentiation lives and dies on its end markets, and the filing is candid that shifts in customer demand and the failure to respond to them could hurt the business (accession 0002011641-25-000027). Half the revenue base is currently going the wrong way.
The valuation leaves little margin for a cycle turn. The price implies about 19% operating-profit growth a year for five years, which is demanding for a company guiding to only low to mid-single-digit sales growth and a 9.4% to 9.8% adjusted operating margin. The static frames are blunt about the gap: the earnings-power and FCF-yield methods land in the high $80s, the Graham number at $87, and zero-growth earnings capitalization well below the price. If the implied growth proves optimistic, there is a long way down to where current earnings power alone supports the stock.
The most concrete near-term warning came from the company's own cash flow. The stock fell about 3.9% after the March print specifically because investors focused on declining cash flow and the residential softness, and management chose to maintain rather than raise full-year guidance. Each point of cost of capital moves the implied growth by about 7 points, so a higher-for-longer rate path would hit Ferguson twice: directly through the discount rate and indirectly through the housing demand that drives half its book. A premium multiple on a cyclical distributor at a cycle that is already softening on the consumer side is the core risk.
Valuation
Start by inverting the price. At $238 the market pays about 21x company-wide operating income, which solves to roughly 19% annual operating-profit growth over a five-year stage at a 9.5% cost of capital with 4% terminal growth. Each point of cost of capital shifts that implied growth by about 7 points, and the rate-robustness flag is off, so the assumption is genuinely sensitive to the discount rate. The implied 19% is in the upper half of what a scaled distributor can plausibly sustain, with historically only about 38% of comparable fast-growers holding a pace like it for a full five years.
The model X-ray splits the way it usually does for a high-return, asset-light business. The growth family clusters tight around the price, with the perpetual-growth DCF at $235 and the exit-multiple DCF at $244, and the relative family is even more favorable, with sector-multiple methods reaching above the price. The asset and earnings families say expensive: simple excess return at $123, FCF-yield and earnings-power methods in the high $80s, and a normalized-EBIT reading that is an artifact of short history and should be ignored rather than read as a signal.
The resulting band runs from about $147 at the low end to $159 at the base and $177 at the high, with reliability tagged as ok, and today's price sits above that high mark. That tension is the honest summary: on forward-economics methods the price is fair, but on the firm's own band and on its current cash generation it is rich, and the gap is the growth-and-durability premium the buyer is underwriting.
Catalysts
The quarter ended March 31, 2026 was the most recent hard data point and it cut both ways. Net sales rose 3.6% to $7.5 billion, adjusted EPS rose 9.1% to $2.28, and gross margin improved 30 basis points to 31.0%, but non-residential grew 8% while residential declined 1% and HVAC slipped about 1%. The shares fell roughly 3.9% on the print as investors focused on softer cash flow and the residential drag. The next quarter is the live test of whether non-residential strength keeps offsetting the housing softness.
Guidance is the framing variable. Ferguson maintained its full-year 2026 outlook for low to mid-single-digit net sales growth and a 9.4% to 9.8% adjusted operating margin, declining to raise it after the beat, which signals that management sees similar market conditions ahead rather than an inflection. A guidance revision in either direction would move the stock more than the headline revenue line.
Sentiment is mixed-to-cautious. Across the analysts following the name the average 12-month target sits in the low $200s with a high near $273 and a low near $201, framing the consensus view as the stock being near or slightly above fair value, with the residential cycle the swing factor most likely to decide which target proves right.
Sources: investing.com (Q1 2026 slides and transcript), chartmill.com (Q1 print recap), corporate.ferguson.com (Q1 release), simplywall.st (FERG outlook).
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- CNM (Core & Main, Inc.)
- (no filing in the citation store)
- WSO (WATSCO INC)
- (no filing in the citation store)
- GWW (W.W. GRAINGER, INC.)
- (no filing in the citation store)
- WCC (WESCO International, Inc.)
- (no filing in the citation store)
- POOL (POOL CORPORATION)
- (no filing in the citation store)
- RS (RELIANCE, INC.)
- (no filing in the citation store)
- SITE (SiteOne Landscape Supply, Inc.)
- (no filing in the citation store)
- FAST (FASTENAL CO)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.