Yahoo Finance At US$956, Is W.W. Grainger, Inc. (NYSE:GWW) Worth Looking At Closely?
Today we're going to take a look at the well-established W.W. Grainger, Inc. (NYSE:GWW). The company's stock saw a decent share price growth of 14% on the NYSE over the last few months. The recent share price gains has brought the company back closer to its yearly peak. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine W.W. Grainger’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
View our latest analysis for W.W. Grainger
Is W.W. Grainger Still Cheap?
W.W. Grainger is currently expensive based on our price multiple model, where we look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that W.W. Grainger’s ratio of 25.7x is above its peer average of 17.84x, which suggests the stock is trading at a higher price compared to the Trade Distributors industry. But, is there another opportunity to buy low in the future? Since W.W. Grainger’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from W.W. Grainger?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. With profit expected to grow by 22% over the next couple of years, the future seems bright for W.W. Grainger. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in GWW’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe GWW should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on GWW for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for GWW, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing W.W. Grainger at this point in time. For example - W.W. Grainger has 1 warning sign we think you should be aware of.
If you are no longer interested in W.W. Grainger, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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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.
