GWW W. W. Grainger
Best-in-class MRO franchise, but still priced roughly double what disciplined drivers justify.
The story
Grainger is the dominant scaled MRO distributor, running a high-touch model (technical service, inventory management, e-commerce) that smaller players can't match, giving it durable share gains in a slow-growth industrial supply market. It's a mature, cash-generative franchise, not a growth story — the moat protects margin and market share, not a step-change in growth rate.
TTM margin (14.3%) and sales-to-capital (2.95) came in slightly above prior assumptions, so I nudged target margin to 14.0% and S/C to 2.85 — both modest, non-material moves that keep the story of margin normalizing off the 15.7% peak toward sustainable mid-teens economics; growth and risk drivers are unchanged since the underlying business narrative hasn't shifted.
Value drivers
| Revenue growth (Y1) | 6.0% |
| Terminal growth | 2.5% |
| Forecast horizon | 6y |
| Target operating margin | 14.0% |
| Years to target margin | 5 |
| Sales-to-capital | 2.85 |
| Beta | 1.05 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 9.2% |
| Terminal WACC | 8.9% |
Valuation bridge
| PV of explicit FCFF | 8.68B |
| PV of terminal value | 19.21B |
| Equity value | 25.33B |
| ÷ shares → per share | $536.43 |
News
neutral -0.10 · 8 articles
- W.W. Grainger Q2 Earnings Call Highlights
- Compared to Estimates, W.W. Grainger (GWW) Q2 Earnings: A Look at Key Metrics
- W.W. Grainger Inc (GWW) (Q2 2026) Earnings Call Highlights: Strong Sales Growth and Raised ...
- W.W. Grainger, Inc. Q2 2026 Earnings Call Summary
- Grainger Beats Q2 Earnings Estimates on Margin Gains, Raises Outlook
- Why W.W. Grainger (GWW) Stock Is Trading Lower Today
- W.W. Grainger (GWW) Tops Q2 Earnings and Revenue Estimates
- W.W. Grainger’s (NYSE:GWW) Q2 CY2026: Beats On Revenue But Stock Drops
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 19.48B | 6.0% | 14.2% | 2.06B | 386.91M | 1.68B | 1.54B |
| 2 | 20.51B | 5.3% | 14.2% | 2.16B | 362.27M | 1.80B | 1.51B |
| 3 | 21.46B | 4.6% | 14.1% | 2.25B | 331.09M | 1.92B | 1.48B |
| 4 | 22.29B | 3.9% | 14.1% | 2.33B | 293.62M | 2.04B | 1.44B |
| 5 | 23.01B | 3.2% | 14.0% | 2.40B | 250.31M | 2.15B | 1.38B |
| 6 | 23.58B | 2.5% | 14.0% | 2.46B | 201.82M | 2.25B | 1.33B |
Key risks
- Margin could keep compressing below 14% if freight/SG&A deleverage continues industry-wide
- Slowing industrial production growth caps volume growth below the 5-6% assumed
- Multiple compression risk given the stock trades far above intrinsic value on any reasonable driver set
Catalysts
- Continued share gains from smaller independent distributors via digital/inventory-management tools
- Raised full-year guidance cited in Q2 2026 earnings call if it signals durable reacceleration