Ferguson Enterprises (FERG): Is the Stock Still Undervalued Amid Rising Valuation Concerns?

The debate over whether Ferguson Enterprises (FERG) remains undervalued has taken on new urgency as its valuation metrics diverge from historical norms and industry benchmarks. With the stock trading at a forward P/E ratio of 21.84 as of November 2025, a figure that has risen to 25.37 in recent weeks, investors are grappling with whether the company's growth prospects justify the premium. This analysis examines FERG's valuation dislocation and the sustainability of its growth trajectory, drawing on recent financial data and industry comparisons.

Valuation Dislocation: A Mixed Picture

FERG's valuation metrics present a nuanced picture. Its forward P/E ratio of 25.37 as of November 2025 exceeds both its five-year historical average of 19.04 and the Industrials sector average of 24.6, suggesting the stock is no longer trading at a discount relative to earnings expectations. However, the company's price-to-sales (P/S) ratio of 1.43 remains below the plumbing and building products industry average of 2.139, hinting at potential undervaluation when measured against revenue rather than earnings.

The price-to-book (P/B) ratio further complicates the narrative. At 7.98 FERG's P/B is above its five-year average, indicating investors are paying a premium for its balance sheet strength. Yet, without a clear industry benchmark for P/B in the plumbing sector, it is difficult to assess whether this premium is warranted. The divergence between FERG's P/E and P/S ratios underscores a valuation dislocation: while earnings are commanding a higher multiple, sales are undervalued relative to peers.

Growth Sustainability: Margin Gains and Revenue Outlook

FERG's recent financial performance offers some justification for the valuation premium. In Q3 2025, the company reported margin gains driven by cost discipline and pricing power, with management raising its full-year revenue growth outlook to low-to-mid single digits. These improvements suggest the company is navigating macroeconomic headwinds, such as softening demand in the commercial construction sector, with resilience.

However, the sustainability of this growth remains a question mark. While FERG's trailing twelve months (TTM) earnings per share (EPS) of $9.33 reflect solid profitability, the plumbing and building products industry faces structural challenges, including supply chain volatility and cyclical demand. Analysts have not provided explicit guidance on long-term margin expansion, leaving investors to speculate whether FERG's recent gains are a temporary boost or a harbinger of durable growth.

The Valuation Riddle: Fair or Overvalued?

The key to assessing FERG's valuation lies in reconciling its divergent metrics. A P/S ratio below industry averages implies undervaluation if the company can convert revenue into profits more efficiently than peers. Conversely, a P/E ratio above sector averages suggests investors are paying a premium for earnings growth that may not materialize. The absence of a clear industry P/B benchmark adds uncertainty, as it is unclear whether FERG's balance sheet strength is being appropriately priced.

For now, FERG appears to occupy a middle ground. Its valuation is no longer "cheap" by historical standards but remains attractively positioned relative to its revenue multiples. The critical factor will be whether the company can sustain its margin improvements and revenue growth amid a challenging macroeconomic environment. If FERG can demonstrate that its recent performance is the start of a broader trend-rather than an isolated quarter-it may justify the current premium.

Conclusion

FERG's valuation is neither a clear bargain nor a glaring overreach. The stock's dislocation between earnings and sales multiples reflects a market that is cautiously optimistic about the company's growth but skeptical about its ability to sustain it. Investors should monitor two key metrics: the trajectory of FERG's revenue growth and its ability to maintain margin expansion. Until these factors align with valuation expectations, the question of whether FERG is undervalued will remain unresolved.