Ferguson FERG

Reference table

1. What they actually sell — and what the segment disclosure will and will not tell you

Ferguson distributes plumbing and heating supplies (pipes, valves, fittings, water heaters, kitchen and bathroom fixtures), HVAC and refrigeration equipment, fire sprinkler systems, water management products (water meters, irrigation, drainage, geosynthetics, stormwater), and industrial MRO (flanges, HDPE, custom fabrication, water and wastewater treatment, pipe-valve-fitting systems) to residential, commercial, civil/infrastructure and industrial customers across the United States and Canada. It employs 35,000 people. CEO Kevin Murphy.

The segment disclosure in this dataset is thin and we should say so. seg_prod contains exactly one row — FY2025, "United States Segment: $29.269B". seg_geo contains exactly one row — FY2025, "Canada Segment: $1.493B". That is the entire segment history available here.

What it does tell us, cleanly: US 95.1%, Canada 4.9% of FY2025's $30.762B. Ferguson is, for practical purposes, a US business with a Canadian tail. What it does not tell us, and we will not invent: the end-market split between residential, commercial, civil and industrial; the product-line mix; or any data-centre or electrification exposure. There is no data-centre revenue disclosure in this file.

2. The three lost years — the part most write-ups skip

This is the context that makes the FY2026 recovery legible, and it is unflattering.

Read the FY2022-to-FY2025 columns together and the picture is stark:

• Revenue: +7.7% total, or 2.5% a year.
• Operating margin: 9.87% to 8.47% — 140 basis points of compression.
• Operating income: $2.820B to $2.606B — down 7.6% in absolute dollars.
• Diluted EPS: $9.69 to $9.32 — down 3.8%.
• Share count: 218.9M to 199.2M — down 9.0%, or 3.1% a year.

So EPS fell 3.8% while the share count fell 9.0%. Absent the buyback, earnings per share would have declined considerably more. That is the honest characterisation of FY2023-FY2025: a three-year earnings recession in a cyclical business, partially concealed by capital returns.

The five-year picture looks better only because FY2020-FY2022 captured the post-pandemic construction and building-materials inflation spike — the FY2020-to-FY2025 revenue CAGR of 9.06% is almost entirely front-loaded into those two years.

3. The FY2026 recovery — real, margin-led, and missing a revenue leg

What is genuinely good. Operating margin recovered 100 basis points year over year on the nine months, from 7.55% to 8.55%, driving operating income up 17.7% on revenue up only 3.9%. EPS is up 21.5%. That is real operating leverage and it is the core of the bull case.

What is genuinely concerning. The recovery decelerated sharply through the year: EPS growth went +24.5% → +44.2% → +2.9%, and revenue went +5.1% → +9.1% → minus 2.0%. The most recent reported quarter had negative revenue growth. If Q3 was a weather or timing artefact, the Q4 print will say so. If it was the start of a renewed downturn in end-markets, the entire FY2026 margin recovery is standing on a shrinking base.

The Q4 setup is instructive. Consensus for 2026-08-10 is EPS $3.30 on revenue $8.676B. Against Q4 FY2025 actuals of $3.54 and $8.497B, that is revenue plus 2.1% and EPS minus 6.8%. The Street is already modelling a down quarter on earnings. So the earnings bar is low — the informative line will be revenue.

4. The serial-acquirer frame — and what the capital allocation has actually become

The task frame for Ferguson is organic versus acquired growth and incremental margins. Here is what the data supports.

The most important observation in this section: Ferguson has stopped being a consolidator and become a share-shrinker. Acquisition spend halved — $650M and $616M in FY2022-FY2023 down to $260M and $301M in FY2024-FY2025 — while buybacks ran $948M in FY2025, which is 3.1x the acquisition spend. Whatever the reason (price discipline, a thin target pipeline, or a deliberate strategy shift), the growth algorithm has changed materially, and it matters because a distributor that stops buying share is a distributor whose growth is now purely organic and cyclical.

The dataset does not disclose organic versus acquired revenue growth and we are not going to estimate it. What we can say is that with only ~$300M of annual bolt-on spend against $30B of revenue, the acquired contribution to recent growth is necessarily small — which means the 2.5% annual revenue growth of FY2022-FY2025 was very nearly all organic, and that is the number to judge the business on.

The cash-conversion yellow flag. FY2025 free cash flow conversion was a healthy 86.4%. But the TTM figures tell a different story: incomeQualityTTM is 0.598 — operating cash flow is only 59.8% of net income — producing a trailing price-to-free-cash-flow of 48.1x against a price-to-earnings of 23.7x, and a free cash flow yield of 2.08% against an earnings yield of 4.26%. That gap is a working-capital build (inventory grew from $4.188B to $4.492B in FY2025, and cash conversion cycle is 59.0 days). It is not alarming in a recovering distributor restocking into demand — but the earnings recovery is not yet a cash recovery, and that distinction should decide how much credit the FY2026 EPS growth gets.

The unexplained item — flagged, not resolved. Retained earnings fell from $9.589B (FY2024) to $6.776B (FY2025), a decline of $2.813B, in a year with $1.856B of net income and $1.437B of dividends plus buybacks combined. Simple arithmetic leaves a residual of roughly $3.2B that this dataset does not explain. It is most likely a capital or corporate reorganisation entry rather than an economic loss — total equity actually rose from $5.616B to $5.832B over the same period, which argues strongly against value destruction. But the dataset does not say, we will not guess, and any reader should check the FY2025 statement of changes in equity before relying on book-value-derived figures.

5. Financials — the receipts

• Revenue: FY2025 $30.762B (+3.8%); five-year CAGR 9.06% (heavily front-loaded into FY2021-FY2022); three-year CAGR from FY2022 2.5%.
• Profitability: FY2025 gross profit $9.435B (30.7% margin), SG&A $6.376B (20.7% of revenue), operating income $2.606B (8.47%), EBITDA $3.059B (9.94%), net income $1.856B (6.03%), diluted EPS $9.32.
• Returns (TTM): ROE 35.1%, ROIC 17.7%, ROCE 24.0%, return on assets 11.7%, asset turnover 1.78x. These are excellent and they are the reason to care about this company at all.
• Balance sheet (2025-07-31): cash $674M, inventory $4.492B, total current assets $10.146B, PP&E $3.609B, goodwill $2.464B, intangibles $726M, total assets $17.729B, total current liabilities $6.028B, long-term debt $3.752B, total debt $5.966B, total liabilities $11.897B, equity $5.832B, no minority interest. Net debt $5.292B = 1.58x TTM EBITDA. Current ratio 1.78x, quick ratio 0.96x. Debt-to-equity 1.036x. Interest coverage 15.4x.
• Working capital: days sales outstanding 42.3, days inventory 77.9, days payable 61.3 → cash conversion cycle 59.0 days. Normal for distribution; the direction of travel is what matters.
• Capital intensity: capex $305M = 0.99% of revenue, capex-to-depreciation 0.60x. Genuinely asset-light.
• Dividend: $3.50 per share TTM, a 1.40% yield at $250.08, payout ratio 24.5% — comfortably covered and with room to grow.
• FMP quantitative rating: B, overall score 3, with ROE 5 and ROA 5 (strong) against debt-to-equity 1, P/E 2 and P/B 1 (weak). The quant likes the returns and dislikes the leverage-adjusted valuation.

6. Valuation — priced in or room?

At $250.08 (market cap $48.500B, net debt $5.292B, EV $53.763B):

Important basis caveat, and it affects every forward multiple above. The consensus EPS series is an adjusted measure that runs materially above GAAP diluted EPS. Check it against history: FY2025 consensus was $9.94 against a GAAP actual of $9.32 (adjusted ran 6.7% higher); FY2024 consensus was $9.66 against $8.53 (13.2% higher). So every forward P/E in this dive is computed on consensus adjusted EPS and is therefore optically lower than the equivalent GAAP multiple would be. Treat 19.9x FY2027E as roughly 21-22x on a GAAP-comparable basis.

Street position: consensus PT $288.60 (+15.4%), median $297, high $300, low $265 (+6.0%). Ratings: 12 buy, 4 hold, 0 sell. The entire published target range sits above the current price — the Street is uniformly constructive, which is itself a reason for caution rather than comfort.

Synthos fair values:

• Bear ~$201 — 16x FY2027E consensus adjusted EPS ($12.575). Gets there if the Q3 FY2026 revenue decline was the leading edge of a renewed construction downturn and the margin recovery stalls near 8.5%. That level sits just below the 52-week low of $207.64-$211.61. -19.6%.
• Base ~$251.50 — 20x FY2027E consensus adjusted EPS ($12.575). Twenty times is a fair multiple for a 35%-ROE, 24%-ROCE distributor growing revenue ~6% and EPS ~11%, with roughly a third of that EPS growth coming from the buyback. Cross-check: it is also 18.1x FY2028E. +0.6% — essentially spot.
• Bull ~$307 — 22x FY2028E consensus adjusted EPS ($13.934). Requires the margin recovery to continue past 9% toward the FY2022 peak of 9.87%, revenue to reaccelerate above 6%, and the buyback to keep retiring ~3% a year. Brackets the Street high of $300. +22.6%.

Base sits 0.6% above spot. That is the verdict: no edge at this price, which under the house rule for no-edge names defaults toward Watch.

6a. What today's price assumes (the inversion)

At $250.08 (22.1x FY2026E, 19.9x FY2027E consensus adjusted EPS), today's price assumes roughly:

• Revenue compounds at about 6% a year through FY2028, reaching the consensus $36.792B — versus the 2.5% a year actually delivered from FY2022 to FY2025 and the minus 2.0% printed in Q3 FY2026. (Falsifiable: the 2026-08-10 Q4 revenue print against the $8.676B consensus, then the FY2027 quarters.) Consensus-derived, 14 analysts on FY2028 revenue.
• Operating margin recovers from the 8.47% FY2025 low toward roughly 9.0% — consensus FY2028E EBIT of $3.313B on $36.792B of revenue is a 9.01% EBIT margin, still below the 9.87% FY2022 peak but well above FY2025. (Falsifiable: quarterly operating margin against the 8.55% nine-month FY2026 level.)
• Adjusted EPS reaches ~$13.93 by FY2028 — implying net income near $2.829B against FY2025's $1.856B, i.e. net income up 52% in three years on revenue up 20%. (Falsifiable: the annual prints. Note only 7 EPS analysts cover FY2028.)
• The share count keeps shrinking at roughly 3% a year, as it has (218.9M to 199.2M over FY2022-FY2025), which supplies roughly a third of the projected EPS growth. (Falsifiable: the diluted share count each quarter and the buyback line, $948M in FY2025.)
• Cash conversion normalises back toward 85%-plus of net income from the current TTM 59.8%. (Falsifiable: quarterly operating cash flow. This is the assumption receiving the least attention and it is the reason the stock is 48.1x trailing free cash flow while looking like 23.7x earnings.)
• The market keeps paying about 20x forward adjusted earnings — i.e. no de-rating despite a business that just posted a negative revenue quarter. (Falsifiable in the price.)

The single most fragile assumption is the first one — 6% revenue growth from a business that has delivered 2.5% for three years and whose most recent quarter was negative. Everything else in the chain (margin recovery, EPS, the buyback) depends on the volume line, and the volume line is the one that just went the wrong way.

6b. The return bridge (why the multiple moves)

expected return ≈ EPS growth + multiple drift + shareholder yield

Over a two-year horizon to FY2028E, consensus adjusted EPS grows from $11.29 to $13.93 — 11.1% a year. Shareholder yield is meaningful here and worth counting properly: the 1.40% dividend plus roughly 3.1% a year of share-count reduction gives about 4.5% — though the buyback is already inside the EPS growth figure, so counting it twice would be double-dipping. The clean decomposition is therefore ~11% EPS growth (of which about a third is the buyback) plus a 1.4% dividend, less multiple drift.

Our base case assumes essentially FLAT multiples — 19.9x FY2027E today becoming 20x FY2027E at fair value. We are explicitly not underwriting expansion, and we are not forecasting compression either. The reasoning: at 20x for an 11% EPS grower with 24% ROCE, the multiple is neither stretched nor cheap, and there is no obvious catalyst for the market to re-rate it in either direction absent a change in the growth rate.

Note the rolldown trap. 22.1x FY2026E becoming 17.9x FY2028E at an unchanged $250.08 is mechanical, not a re-rating — it is the estimate advancing. Anyone quoting "under 18x" as evidence of cheapness is quoting a 2028 number at a 2026 price.

So the bridge is: +11.1% a year of EPS growth, +1.4% dividend, roughly 0% from the multiple — call it 12-13% a year IF consensus is met. The entire question is the "if," and it rests on 6% revenue growth from a business that just printed minus 2.0%.

6c. Variant perception (where we differ, what would surprise)

• We differ from consensus on the durability of the revenue line, not on the quality of the business. The Street models 6.4%, 5.8% and 6.2% revenue growth for FY2026-FY2028 with every single published price target above the current price and no sell ratings. We think the FY2022-FY2025 record — 2.5% a year with 140 basis points of margin compression — is a better guide to the through-cycle rate than the FY2026 recovery quarters, and that Q3 FY2026's minus 2.0% deserves far more weight than it is getting. If revenue runs at 3-4% rather than 6%, FY2028E EPS lands nearer $12.50 than $13.93 and the stock is worth about $225, not $290.
• We also think the cash-conversion gap is under-discussed. A trailing price-to-free-cash-flow of 48.1x against a P/E of 23.7x is not a rounding difference — it is the market valuing an earnings recovery that has not yet converted to cash. If working capital normalises, this resolves harmlessly. If it does not, the "cheap on earnings" framing collapses.
• Positive surprise that would force a repricing higher. The 2026-08-10 print showing revenue at or above the $8.676B consensus with operating margin above 9%, plus operating cash flow recovering toward net income. That would confirm Q3 was an artefact, validate the 6% consensus growth path, and make the $288-$307 zone the right frame. This is a genuinely plausible outcome and it is exactly why the verdict is Watch rather than Avoid.
• Negative surprise that would force a repricing lower. A second consecutive quarter of negative or flat revenue, or margin giving back the nine-month gain. At 20x with the stock having just gapped 6.7% higher and no KB conviction lane underneath it, that opens the $201-$225 zone fast. The watchable number is quarterly revenue growth, not EPS — consensus already models EPS down 6.8% year over year for Q4.

7. Knowledge base — zero coverage, and a name collision worth documenting

There are ZERO knowledge-base claims naming Ferguson plc, Ferguson Enterprises, or the FERG ticker. kb_claim_count: 0, breadth 0.

This deserves a note because the naive search does not return zero. A regex for "Ferguson" across the 51,928-claim base returns 6 hits — and every one of them is the historian Niall Ferguson discussing sovereign debt:

• Niall Ferguson, 2025-05-17, conviction 85 — "Ferguson's Law: when interest payments exceed defense spending a great power declines; the US just crossed this line and is near a crunch point."
• Forward Guidance, 2025-09-03, conviction 78 — "High US debt-to-GDP isn't a solvency risk under fiat; rates are policy-set, not supply/demand, so Ferguson's interest-exceeds-defense 'bust' thesis fails."
• Plus four further Niall Ferguson claims (2025-10-06, 2026-01-19, 2026-03-20, 2026-04-27) restating the same law.

None of these has anything to do with a plumbing distributor. Any process that counts string matches rather than reading them would have produced a spurious "6 claims, conviction 78-85" conviction rating for this ticker. We are documenting the collision because it is exactly the kind of error that would corrupt a verdict, and because a zero is only credible if you can show the search was done properly.

Consequence: the FERG verdict is fundamentals and quant driven only. This is a precedented outcome (see the STM and NVTS dives) and is not a reason to manufacture conviction.

Adjacent theme claims, explicitly labelled as NOT naming Ferguson. The knowledge base does cover the category:

• Odd Lots, 2026-04-22, conviction 70 — "Insulation is a needed, durable product every building requires; it won't be disrupted ... and isn't going away, with US manufacturing protected by country-specific building codes."
• Odd Lots, 2026-04-22, conviction 70 (about TopBuild, not Ferguson) — "Data centers are big consumers of building products (insulation, roofing, waterproofing, lumber)."
• Odd Lots, 2026-04-22, conviction 55 — "Mortgage rates (now ~6.5%, down from 7.5%) will come down more under this administration once the Iran war ends, and building products business will start booming."
• Compound and Friends, 2026-02-27, conviction 70 — "AI-derivative industrials (HVAC, power, electrical services) are firmly in gear and reversing well off bear-market lows."
• Forward Guidance, 2025-03-05, conviction 70, bearish — "Deterioration in Industrials looks real (not just beta), aligned with rate-sensitive homebuilders and building products."

These are category-level views, some supportive and one negative, none of which underwrite this specific company. We are not converting them into conviction on FERG.

8. Technicals — a one-day gap into a catalyst

• Price $250.08 (2026-08-03 close), up 6.72% in that single session from a $234.33 previous close, on 10.35M shares. The dataset gives no explanation for the move — no news field, no filing, no analyst action in the file. We are flagging it as unexplained rather than rationalising it.
• That one session reclaimed both averages. The stock is now +8.4% above the 50-day average ($230.72) and +4.1% above the 200-day average ($240.30) — having been below both the day before.
• 52-week range $207.64-$271.64 (quote) / $211.61-$267.71 (tech). Price is -6.6% from the tech-block high and +18.2% above the low.
• RSI 63.6, MACD +1.15 — momentum turned positive on the gap.
• Relative performance: -5.4% (3-month), -0.9% (6-month), +12.0% (12-month), against SPY at +5.1% / +9.5% / +19.9%. Ferguson has underperformed the index over every window in the file, including the one that contains the gap.

Read: a downtrending stock that just gapped through both averages six days before earnings. The technical picture improved materially in one day — which is precisely why it should not be trusted until the print confirms it. If Q4 disappoints, the gap fills toward $234 and the 200-DMA at $240.30 becomes resistance again.

Insider activity contains no information: all eight records are small A-Award grants to directors and officers between 2026-05-28 and 2026-07-09 (fractional share counts of 1.47 to 17.42 units at $220-$224). No open-market purchases, no sales. Nothing to read either way.

9. Verdict, kill-criteria and the flip conditions

Watch (pre-catalyst). No position before 2026-08-10.

Ferguson is a legitimately high-quality business — 35.1% return on equity, 17.7% ROIC, 24.0% ROCE, 15.4x interest coverage, 1.58x leverage, capex under 1% of revenue, a 24.5% dividend payout, and a buyback that has retired 9.0% of the shares in three years. Nine-month FY2026 shows a real margin recovery: operating margin 8.55% versus 7.55%, operating income plus 17.7%, EPS plus 21.5%.

Three things say wait. First, the top line has not recovered — revenue grew 2.5% a year from FY2022 to FY2025 and Q3 FY2026 printed minus 2.0%, so the entire FY2026 improvement is margin and buyback rather than volume. Second, the earnings recovery is not yet a cash recovery — trailing operating cash flow is only 59.8% of net income, putting the stock at 48.1x trailing free cash flow against a 23.7x P/E. Third, the timing is bad — a plus 6.72% single-session gap the data does not explain, six days before the Q4 FY2026 print, into a base fair value of $251.50 that is 0.6% above spot. We have no edge at this price, and the house rule for no-edge names is Watch.

Pre-registered kill / avoid criteria:

• A second consecutive quarter of flat or negative revenue at the 2026-08-10 print (consensus $8.676B) — the Q3 minus 2.0% was the trend, not an artefact, and the 6% consensus growth path is wrong.
• Operating margin giving back the nine-month gain, falling back toward the 7.5%-8.0% zone.
• Cash conversion staying below ~70% of net income for another two quarters — the working-capital build is structural, not transitory, and the free-cash-flow multiple is the true one.
• The FY2025 retained-earnings residual turning out to be economic rather than a reorganisation entry (check the statement of changes in equity).
• Losing the reclaimed 200-DMA ($240.30) on the print — the gap was a fake-out and the downtrend resumes.

Pre-registered flip to Stage-In:

• The 2026-08-10 print delivering revenue at or above $8.676B with operating margin above 9% and operating cash flow recovering toward net income. That confirms the recovery has a volume leg and validates the consensus path — at which point a 2-3% starter in the industrial-distribution sleeve is justified, ideally on any post-print consolidation back toward the 200-DMA at $240.30.
• OR a pullback to the $201-$215 zone (near the 52-week low) on no fundamental deterioration, which takes the FY2027E multiple to 16-17x for a 35%-ROE distributor. That is a price with a margin of safety.

Where FERG fits in the Synthos Framework Portfolio. The cyclical-quality / industrial-distribution sleeve, as a 2-3% position once the revenue line confirms — sized modestly because there is no knowledge-base conviction lane underneath it and because the business is genuinely cyclical. Note the diversification logic: this is a domestic, physical, rate-and-construction-sensitive holding whose drivers have almost nothing in common with the AI-infrastructure complex, which is a real portfolio benefit and also the reason it has underperformed the index over every window in this dataset. Logged as a tracked Synthos call (Watch, pre-catalyst) as of 2026-08-04 at $250.08.

Single biggest risk: a top line that never reaccelerates. Revenue grew 2.5% a year for three years and the most recent quarter was negative 2.0%. Every element of the bull case — margin recovery, 11% EPS growth, the buyback's per-share arithmetic — is levered to a volume recovery that has not yet shown up in the reported numbers.

Single most fragile assumption in the price: that revenue compounds at ~6% a year through FY2028. Consensus needs it, the multiple needs it, and the company's own last three years and last reported quarter both argue against it.

Provenance and disclosures

• Traceability: ZERO knowledge-base claims name Ferguson plc across the full 51,928-claim base. kb_claim_count: 0, breadth 0. Section 7 documents the name collision that makes a naive search misleading — all six "Ferguson" regex hits resolve to the historian Niall Ferguson on sovereign debt and great-power decline (2025-05-17, 2025-10-06, 2026-01-19, 2026-03-20, 2026-04-27, plus a 2025-09-03 Forward Guidance rebuttal), and none refers to this company. The verdict is therefore fundamentals and quant driven only — a precedented outcome (see the STM and NVTS dives). Five category-level claims on building-products distribution and AI-derivative industrials are cited in section 7 and explicitly labelled as not naming Ferguson.
• Data as-of: prices and quote 2026-08-03 close (FMP quote timestamp 2026-08-03 20:00 UTC; the session closed +6.72% at $250.08 from a $234.33 previous close, on 10.35M shares — the dataset gives no explanation for the move and we have not supplied one) · income statement through Q3 FY2026 (2026-03-31, filed 2026-05-05) · annual balance sheet and cash flow FY2025 (2025-07-31, filed 2025-09-26) · segment data FY2025 only · analyst estimates, price targets, grades and earnings calendar last updated 2026-08-04 · knowledge-base search 2026-08-04.
• Fiscal-year note: Ferguson's fiscal year ends 31 July. All "FY2026E" references are to the year ending 2026-07-31, which closed before this dive was written and reports on 2026-08-10.
• Adjusted-versus-GAAP caveat — affects every forward multiple: the consensus EPS series in this dataset is an adjusted measure running above GAAP diluted EPS. Historical check: FY2025 consensus $9.94 versus GAAP actual $9.32 (+6.7%); FY2024 consensus $9.66 versus GAAP actual $8.53 (+13.2%). All forward P/E figures here are on consensus adjusted EPS and are optically lower than GAAP-comparable multiples would be. The same basis mismatch explains why nine-month GAAP EPS of $7.02 plus a $3.30 Q4 estimate does not sum to the $11.29 FY2026E consensus.
• Segment-disclosure gap: seg_prod contains a single row (FY2025, "United States Segment $29.269B") and seg_geo a single row (FY2025, "Canada Segment $1.493B"). There is no end-market split (residential/commercial/civil/industrial), no product-line detail, and no data-centre revenue disclosure anywhere in this dataset. Statements about end-market exposure in this dive are limited to what those two rows support.
• Unresolved item, flagged not resolved: retained earnings declined $2.813B in FY2025 (from $9.589B to $6.776B) against $1.856B of net income and $1.437B of dividends plus buybacks, leaving a residual of roughly $3.2B the dataset does not explain. Total equity rose over the same period ($5.616B to $5.832B), which argues against economic value destruction and toward a capital or corporate reorganisation entry — but the dataset does not say so and we have not assumed it. Check the FY2025 statement of changes in equity.
• Estimate depth: FY2028E rests on 7 EPS analysts and FY2029E-FY2030E on 5 and 2 respectively. Out-year figures are treated as indicative, not load-bearing; the FY2030E revenue estimate of $38.767B (only +0.6% over FY2029E, on 2 analysts) is not used anywhere in the valuation.
• Fair-value method: scenario multiples on consensus adjusted EPS — bear 16x FY2027E ($12.575), base 20x FY2027E ($12.575), bull 22x FY2028E ($13.934). Stated arithmetic, not a discounted cash flow.
• Not investment advice. Independent research, educational and informational only, never personalised.
• Version: 2026-08-04-full.