Ferguson Enterprises Inc. (FERG): A Bull Case Theory

Core Thesis - Ferguson Enterprises Inc. is viewed positively due to its strong market position and financial performance, with shares trading at $251.54 as of December 1st, and trailing and forward P/E ratios of 26.99 and 22.62 respectively [1][2] Company Overview - Ferguson Enterprises is the largest plumbing and HVAC distributor in North America, demonstrating durable market leadership and earning a narrow moat rating from Morningstar [2] - The company has undergone a reorganization and relocated its headquarters to the U.S., enhancing its operating profile and returning significant capital to shareholders through dividends and a $4.0 billion repurchase program [3] Financial Performance - Ferguson's five-year annualized revenue growth has been in the high single digits, reflecting resilience despite trailing the S&P 500 [4] - The company maintains mid-single-digit net margins and robust returns on equity, which are twice QVI's target, alongside returns on invested capital exceeding its cost of capital [4] - Owners' earnings growth, combining EPS and dividend growth, has achieved double-digit annualized rates, indicating consistent shareholder value creation [4] Market Position and Outlook - Despite recent revenue growth of 3.8% lagging the broader market, Ferguson's financial strength, cash generation, and leadership position support a bullish outlook [5] - The company's fundamentals remain solid, characterized by effective management execution and sustainable profitability, making it a quality compounder aligned with QVI's long-term investment framework [5] - Ferguson's scale-driven stability in essential infrastructure distribution is emphasized as a key factor in its positive outlook [6]