As of May 22, 2025, W W Grainger Inc's estimated intrinsic value ranges from $407.89 to $1165.10 per share, depending on the valuation methodology applied.
| Valuation Method | Fair Value (USD) | Implied Upside/Downside |
|---|---|---|
| Discounted Cash Flow (10Y) | $1165.10 | +7.7% |
| Discounted Cash Flow (5Y) | $993.25 | -8.2% |
| Dividend Discount Model (Multi-Stage) | $807.53 | -25.3% |
| Dividend Discount Model (Stable) | $638.36 | -41.0% |
| Earnings Power Value | $407.89 | -62.3% |
Is W W Grainger Inc (GWW) undervalued or overvalued?
With the current market price at $1081.38, the stock appears to be moderately overvalued.
Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate W W Grainger Inc's intrinsic value, including:
The cost of capital is a critical factor in valuation models, representing the required return for investors.
| WACC Component | Low | High |
|---|---|---|
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.87 | 0.89 |
| Cost of equity | 7.9% | 9.8% |
| Cost of debt | 4.3% | 4.5% |
| Tax rate | 23.5% | 24.3% |
| Debt/Equity ratio | 0.05 | 0.05 |
| After-tax WACC | 7.6% | 9.5% |
Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:
| DCF Model | Fair Value | Enterprise Value | % from Terminal Value |
|---|---|---|---|
| 5-Year Growth | $993 | $49,460M | 78.3% |
| 10-Year Growth | $1,165 | $57,738M | 62.2% |
| 5-Year EBITDA | $777 | $39,038M | 72.5% |
| 10-Year EBITDA | $967 | $48,177M | 54.7% |
The DDM values a company based on its expected future dividend payments. We used two approaches:
EPV assesses a company's value based on its current normalized earnings power, assuming no growth.
| EPV Component | Value |
|---|---|
| Normalized Earnings | $1,802M |
| Discount Rate (WACC) | 9.5% - 7.6% |
| Enterprise Value | $18,927M - $23,598M |
| Net Debt | $1,615M |
| Equity Value | $17,312M - $21,983M |
| Outstanding Shares | 48M |
| Fair Value | $359 - $456 |
| Selected Fair Value | $407.89 |
| Metric | Value |
|---|---|
| Market Capitalization | $52090M |
| Enterprise Value | $53705M |
| Trailing P/E | 27.27 |
| Forward P/E | 24.10 |
| Trailing EV/EBITDA | 8.75 |
| Current Dividend Yield | 81.22% |
| Dividend Growth Rate (5Y) | 5.64% |
| Debt-to-Equity Ratio | 0.05 |
To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:
| Valuation Method | Weight | Weighted Value |
|---|---|---|
| Discounted Cash Flow (10Y) | 30% | $349.53 |
| Discounted Cash Flow (5Y) | 25% | $248.31 |
| Dividend Discount Model (Multi-Stage) | 20% | $161.51 |
| Dividend Discount Model (Stable) | 15% | $95.75 |
| Earnings Power Value | 10% | $40.79 |
| Weighted Average | 100% | $895.89 |
Based on our comprehensive valuation analysis, W W Grainger Inc's weighted average intrinsic value is $895.89, which is approximately 17.2% below the current market price of $1081.38.
Key investment considerations:
Given these factors, we believe W W Grainger Inc is currently moderately overvalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.