Assessing Ferguson Enterprises (FERG) Valuation After A Year Of Strong Shareholder Returns

Event context and recent performance snapshot

Ferguson Enterprises (FERG) has drawn investor attention after recent trading, with the share price closing at US$260.66 and month and past 3 months returns sitting in the low single digits.

See our latest analysis for Ferguson Enterprises.

While the recent 1-day share price return of 0.45% and 7-day share price return of 0.25% look quiet, Ferguson Enterprises has seen stronger momentum over longer horizons, with a 15.84% year to date share price return and a 50.59% 1-year total shareholder return.

If this steady performance has you thinking about where else capital goods exposure might come from, it could be worth scanning our list of 24 power grid technology and infrastructure stocks for another angle on infrastructure focused names.

With a 1 year total return above 50% and the stock sitting only about 5% below the average analyst price target, the real question is whether Ferguson is still mispriced or whether the market already anticipates its future growth.

Most Popular Narrative: 30% Undervalued

Ferguson Enterprises' widely followed valuation framework pegs fair value at about $261, which sits just above the last close at $260.66 and frames the upside case.

Positive growth prospects in the Waterworks segment due to robust activity in public works and infrastructure projects are expected to boost revenue. Ferguson’s involvement in large capital projects positions it well for continued growth in this diversified segment, which should help improve margins as the business scales.

Read the complete narrative.

Curious how a distributor earns a premium valuation tag? This narrative leans heavily on compounding revenue, thicker margins, and a future earnings multiple that assumes real staying power. The numbers behind that view are worth a closer look.

Result: Fair Value of $261 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this hinges on housing demand and pricing holding up, since weaker residential volumes or prolonged commodity deflation could quickly pressure margins and challenge that premium valuation story.

Find out about the key risks to this Ferguson Enterprises narrative.

Another angle on valuation: cash flows say something different

The fair value of $261 based on earnings and growth assumptions presents Ferguson as about fairly priced, but our DCF model offers a different perspective. Using that approach, future cash flows line up closer to $219 per share, which makes the current $260.66 price appear expensive. Which lens seems more realistic to you?

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 Ferguson Enterprises 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 53 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Reading this, do you feel the story skews more upbeat or cautious? If you want to move quickly from headline impressions to your own judgment, it is worth weighing the key issues on both sides with 2 key rewards and 1 important warning sign.

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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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