FERGUSON ENTERPRISES INC: Warren Buffett's Guru Fundamental Report

Ferguson Enterprises (FERG) is a large-cap growth stock in the Misc. Capital Goods industry, rated 82% using Warren Buffett's Patient Investor model. The stock passes several of the model's tests, including earnings predictability, debt service, return on equity, and free cash flow. However, it fails to meet the expected return test.

Ferguson Enterprises (FERG) is a large-cap growth stock in the Misc. Capital Goods industry, rated 82% using Warren Buffett's Patient Investor model. The stock passes several of the model's tests, including earnings predictability, debt service, return on equity, and free cash flow. However, it fails to meet the expected return test [1].

Ferguson Enterprises distributes plumbing and heating products in the United States and Canada. The company provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, and fabrication, as well as heating, ventilation, and air conditioning (HVAC) to residential and non-residential customers. It also supplies specialist water and wastewater treatment products to residential, commercial, and infrastructure contractors, as well as supplies pipe, valves, and fittings solutions to industrial customers [2].

Financial Performance
The company's fundamentals show a strong market position with a market cap of US$44.08 billion, earnings (TTM) of US$1.61 billion, and revenue (TTM) of US$30.21 billion. The stock has a P/E ratio of 27.3x and a P/S ratio of 1.5x. The company's net profit margin is 5.32%, and its gross margin is 30.46%. The debt/equity ratio stands at 74.1% [3].

Growth Prospects
Ferguson Enterprises has been actively acquiring companies to expand its market presence. For instance, it acquired HPS Specialties, LLC, and National Fire Equipment Limited, among others. These acquisitions have helped the company grow its product offerings and customer base [4]. The company's strategic focus on plumbing and HVAC, alongside optimizing supply chain through automation, positions it for growth and improved operational efficiency [5].

Valuation
The stock is trading at 12.4% below our estimate of its fair value. Earnings are forecast to grow 11.74% per year. However, the stock has a high level of debt, which could pose a risk to its financial health [6]. Despite this, the company's recent earnings reports have exceeded analyst expectations, indicating strong operational performance [7].

Dividends
The company has a current dividend yield of 41% and a payout ratio of 1.5%. It has announced dividends for the upcoming quarter and the year, indicating a commitment to shareholder returns [8].

Risk Analysis
Ferguson Enterprises has a high level of debt, which could be a concern for investors. However, the company has shown reasonable use of debt, indicating that it is managing its debt levels effectively [9]. The stock's volatility has been stable over the past year, with weekly volatility of 6%, which is lower than the market average of 6.5% [10].

Conclusion
Ferguson Enterprises (FERG) is a large-cap growth stock with a strong market position and a history of acquisitions to expand its product offerings. The company's fundamentals show strong financial performance, and its strategic focus on growth and operational efficiency positions it for continued success. However, the stock's high debt level and failure to meet the expected return test using Warren Buffett's Patient Investor model could pose risks for investors.

References
[1] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises
[2] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises
[3] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises
[4] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises
[5] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises
[6] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises
[7] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises
[8] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises
[9] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises
[10] https://simplywall.st/stocks/us/capital-goods/nyse-ferg/ferguson-enterprises