A Look At WESCO International (WCC) Valuation After Strong Recent Share Price Momentum

Why WESCO International is on investors’ radar today

WESCO International (WCC) has drawn fresh interest after its recent share move, with the stock closing at $297.80. Investors are weighing this price against the company’s fundamentals and longer term return record.

See our latest analysis for WESCO International.

The recent 18.1% 1 month share price return at a last close of $297.80 sits alongside a 66% 1 year total shareholder return. This points to strong positive momentum rather than a short lived move.

If WESCO International’s run has caught your attention, it could be a good moment to widen your watchlist with fast growing stocks with high insider ownership.

After a 66% 1 year total return and a share price near the recent analyst target, the key question is whether WESCO International is still trading below its fundamentals or if the market is already pricing in future growth.

Preferred P/E of 22.9x: Is it justified?

On a P/E of 22.9x at a last close of $297.80, WESCO International screens as slightly more expensive than its peer group, yet sits a touch below the estimated fair P/E level.

The P/E ratio compares the share price to earnings per share, so at 22.9x you are paying around 23 times the company’s current earnings. For a distributor with established operations across electrical, communications, and utility markets, this is a key shorthand for how the market values its profit stream.

Analysts’ statements point to forecast earnings growth of 13.1% per year, which is described as positive but not high, while Return on Equity of 13.4% is flagged as low. Against that backdrop, a P/E above the peer average of 21.3x suggests investors are willing to pay a premium. The reference fair P/E of 31x indicates that the market could move higher if those earnings expectations hold and sentiment stays supportive.

Compared with the US Trade Distributors industry average P/E of 23x, WESCO International is effectively in line with the sector, only modestly higher than peers and at a discount to the estimated fair P/E of 31x. That mix of a peer level sector multiple and a gap to the fair ratio frames the current price as neither obviously stretched nor clearly cheap on earnings alone.

Explore the SWS fair ratio for WESCO International

Result: Price-to-Earnings of 22.9x (ABOUT RIGHT)

However, there are risks, including WESCO trading slightly above peer P/E levels and its low value score of 2 if sector sentiment or earnings expectations soften.

Find out about the key risks to this WESCO International narrative.

Another take: cash flows send a different signal

While the P/E of 22.9x makes WESCO International look roughly in line with the trade distributors industry, our DCF model points the other way. At a last close of $297.80 versus an estimated future cash flow value of $294.03, the shares screen as slightly overvalued on this view.

That is not a big gap in dollar terms. However, it does remind you that paying up after a strong run can leave less room for error if earnings or cash flows do not track current expectations. So which matters more to you right now: the earnings multiple or the cash flow picture?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out WESCO International for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 871 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own WESCO International Narrative

If you look at this and think you would weigh the numbers differently, or simply prefer to test your own view, you can build a custom story around WESCO International in just a few minutes with Do it your way.

A great starting point for your WESCO International research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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