Discounted Cash Flow Calculation for OTCPK:FERG.Y using 2 Stage Free Cash Flow to Equity Model
The calculations below outline how an intrinsic value for
is arrived at by discounting future cash flows to their present value using the 2 stage method.
We try to start with analysts estimates of free cash flow, however if these are not available we use the most recent financial results. In the 1st stage we continue to grow the free cash flow over a 10 year period, with the growth rate trending towards the perpetual growth rate used in the 2nd stage. The 2nd stage assumes the company grows at a stable rate into perpetuity.
OTCPK:FERG.Y DCF 1st Stage: Next 10 year cash flow forecast
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Ferguson's share price is below the future cash flow value, and at a moderate discount (> 20%).
Ferguson's share price is below the future cash flow value, and at a substantial discount (> 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Ferguson's earnings available for a low price, and how does
this compare to other companies in the same industry?
Ferguson's earnings are expected to grow by 13.5% yearly, however this is not considered high growth (20% yearly).
Ferguson's revenue is expected to grow by 6% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Ferguson's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
4/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Mr. John W. Martin has been the Chief Executive Officer of Ferguson plc since September 1, 2016 and served as its Group Chief Financial Officer from April 01, 2010 to August 31, 2016. Mr. Martin has been an Executive Director of Ferguson plc since April 1, 2010. He joined the Alchemy Partners LLP as a Partner in 2008. Prior to that, Mr. Martin served as the Chief Financial Officer at Travelex Limited and Travelex Canada Limited, from March 2006 to September 2008. He also served as a Director of Travelex Limited and Travelex Canada Limited until September 30, 2008. Prior to this, he served as the Finance Director at Hays PLC, until March 2006 and as a Director from March 4, 2003 to March 2006. He also served as the Controller at the Stationery Office Group Ltd. Mr. Martin served in senior posts in practice and with other support services organizations before joining the firm. He worked at Arthur Andersen from 1987 to 1996 in audit, financial consulting and corporate finance. He has been a Member of Advisory Board at Alchemy Partners LLP since 2010. Mr. Martin is a C.A. He has extensive operational and financial management experience of running large international businesses. Mr. Martin has strong leadership capabilities and significant experience in strategic development and driving improvements in operational performance.
John's compensation has been consistent with company performance over the past year.
John's remuneration is lower than average for companies of similar size in United States of America.
Management Team Tenure
Average tenure and age of the
management team in years:
The average tenure for the Ferguson management team is less than 2 years, this suggests a new team.
Group Chief Executive & Executive Director
Group CFO & Executive Director
CEO of USA & Executive Director
Group Director of Corporate Finance
Group Chief Information Officer
Director of Corporate Communications & Investor Relations
Head of Corporate Communications
CEO of Canada & Central Europe and Group Head of Corporate Development
Chief Human Resources Officer
Senior Vice President of Alignment and Coordination - Wolseley North America
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The tenure for the Ferguson board of directors is about average.
Ferguson plc distributes plumbing and heating products in the United States, the United Kingdom, Canada, and Central Europe. It offers plumbing and heating solutions to customers in the residential, municipal, civil and industrial markets, and commercial sectors for repair, maintenance, and improvement (RMI), as well as new construction markets. The company also distributes pipes, valves, fittings, hydrants, meters, and related water management products, as well as offers related services, such as water line tapping and pipe fusion services. In addition, it distributes heating, ventilation, air conditioning, refrigeration equipment, and parts and supplies to specialist contractors in the residential and commercial markets for repair and replacement; and PVF products to industrial customers. Further, the company fabricates and supplies fire protection systems and bespoke fabrication services to commercial contractors for new construction and renovation projects, as well as offers products, services, and solutions to enable maintenance of facilities across various RMI markets. Additionally, it offers supply chain management solutions for PVF and maintenance, repair, and operations. The company also sells its home improvement products directly to consumers, as well as through a network of online stores. In addition, it operates its B2B business primarily under the Ferguson brand; and B2C business under the Build.com brand. Further, the company provides products and services for maintenance of multi-family properties, government agencies, hospitality, education, healthcare, and other facilities. It operates a network of 2,280 branches and 19 distribution centers. The company was formerly known as Wolseley plc and changed its name to Ferguson plc in July 2017. Ferguson plc was founded in 1887 and is headquartered in Zug, Switzerland.
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