On October 13, 2023, WESCO International Inc (WCC, Financial) saw a daily loss of 4.02%, contributing to a 3-month loss of 18.15%. Despite these downturns, the company's Earnings Per Share (EPS) stand at a robust 15.09. The question then arises: is the stock fairly valued? In this article, we'll delve into a comprehensive valuation analysis of WESCO International (WCC) to answer this question.
Company Introduction
WESCO International is a global industrial distributor with operations in 50 countries. The company operates through three reportable segments: electrical and electronic solutions, communications and security solutions, and utility and broadband solutions. With over 1.5 million products, WESCO serves 140,000 active customers through a distribution network of 800 branches, warehouses, and sales offices. The company generates 74% of its sales in the United States.
As of October 13, 2023, WESCO International (WCC, Financial) trades at $139.58 per share. With a market cap of $7.20 billion, the company's stock price aligns closely with the GuruFocus Fair Value (GF Value) of $150.97, indicating it is fairly valued.
Understanding GF Value
The GF Value is a proprietary valuation model developed by GuruFocus. It estimates the intrinsic value of a stock based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. Essentially, the GF Value Line on the summary page provides an overview of the stock's fair trading value.
WESCO International's stock is believed to be fairly valued based on the GF Value. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
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Financial Strength of WESCO International
Investing in companies with low financial strength can lead to permanent capital loss. Therefore, it's crucial to review a company's financial strength before investing. WESCO International's cash-to-debt ratio of 0.09 ranks worse than 79.02% of 143 companies in the Industrial Distribution industry. Based on this, GuruFocus ranks WESCO International's financial strength as 6 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies carries less risk. WESCO International has been profitable for 10 years over the past 10 years. Its Earnings Per Share (EPS) of $15.09 and operating margin of 6.71% are better than 57.53% of 146 companies in the Industrial Distribution industry. Overall, GuruFocus ranks WESCO International's profitability as strong.
Growth is a crucial factor in the valuation of a company. WESCO International's 3-year average annual revenue growth rate is 28.6%, which ranks better than 90.78% of 141 companies in the Industrial Distribution industry. The 3-year average EBITDA growth rate is 48.7%, which ranks better than 87.3% of 126 companies in the Industrial Distribution industry.
Evaluating Profitability: ROIC vs. WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can also evaluate its profitability. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, WESCO International's ROIC is 9.96 while its WACC came in at 10.86.
Conclusion
In conclusion, the stock of WESCO International (WCC, Financial) is believed to be fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks better than 87.3% of 126 companies in the Industrial Distribution industry. To learn more about WESCO International stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
