CDW (CDW) Net Margin Compression Tests Bullish Narratives After Q3 FY 2025 Results

CDW (CDW) has put fresh numbers on the table for FY 2025, with third quarter revenue of US$5.7b, basic EPS of US$2.22 and net income of US$291m, giving investors a clearer read on how the year is shaping up. The company has seen revenue move from US$5.2b in Q4 2024 to US$5.2b in Q1 2025, US$6.0b in Q2 2025 and US$5.7b in Q3 2025. Over the same period, quarterly EPS went from US$1.98 to US$1.70, US$2.06 and US$2.22, setting the scene for investors to focus on how these results tie back to margins and the quality of earnings.

See our full analysis for CDW.

With the headline numbers on the table, the next step is to see how this earnings profile lines up with the most widely held narratives around CDW and where the latest margin and growth trends might challenge those views.

Curious how numbers become stories that shape markets? Explore Community Narratives

4.8% Net Margin Puts Profitability In Focus

• Over the last 12 months, CDW converted US$22.1b of revenue into US$1.1b of net income, for a 4.8% net margin compared with 5.3% a year earlier. This sits alongside Q3 FY 2025 net income of US$291m on US$5.7b of revenue.
• Bears often point to margin pressure as a weak spot, and the 4.8% trailing net margin alongside Q3 EPS of US$2.22 invites that view, yet:
  • Five year earnings growth of 4.3% per year shows the business has produced steady profit expansion over a longer stretch, even though the latest year showed a year over year earnings decline against that trend.
  • Q3 FY 2025 net income of US$291m compares with US$271.2m in Q2 FY 2025 and US$224.9m in Q1 FY 2025, so the recent quarters still stack up as solid profit contributors within that softer margin backdrop.

P/E Of 17.1x Versus 27.5x Industry

• CDW is trading on a trailing P/E of 17.1x, below both the US Electronic industry average of 27.5x and a peer average of 18.5x. The current share price of US$138.08 sits close to the DCF fair value of US$139.71 and below the US$174.30 analyst price target that implies around 26.2% upside.
• What stands out for a bullish read is how these valuation markers line up against the earnings record, even with recent softness:
  • The trailing 12 month EPS of US$7.96 is being priced at a discount to the broader industry P/E, which supports the bullish idea that investors are not overpaying for those earnings at around US$138 per share.
  • At the same time, the share price is only fractionally below the DCF fair value while analysts see room up to US$174.30, so bulls can point to both model value and external estimates sitting above where the stock trades today.

To see how these valuation signals line up with the full bullish and bearish arguments around CDW's future, 📊 Read the full CDW Consensus Narrative.

Debt Coverage And Insider Selling Raise Questions

• One of the bigger flags in the recent data is that debt was not well covered by operating cash flow over the last 12 months, and this sits alongside reports of significant insider selling in the most recent three month period.
• Critics highlight these points as a clear bearish angle, and the numbers give that argument some weight:
  • Even with US$1.1b of net income over the trailing year and Q3 FY 2025 EPS of US$2.22, the fact that operating cash flow did not adequately cover debt means the business is leaning more on its balance sheet than bears would like to see.
  • The insider selling signal then sits on top of that cash flow issue, which skeptics view as management choosing to sell at a time when margins are at 4.8% and earnings have just posted a year over year decline versus the earlier 4.3% per year growth pace.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on CDW's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

CDW's softer 4.8% net margin, debt not well covered by operating cash flow, and recent insider selling leave some investors questioning the balance sheet resilience.

If that combination makes you cautious, you could instead look at companies screened for sturdier finances and use solid balance sheet and fundamentals stocks screener (389 results) to focus on businesses with stronger coverage and cleaner balance sheets.

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.

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