WSO
WSO
Reduce 2026-04-09
Model
DCF
Price at Report
$N/A
Base IV
$284.92
Bear IV
$163.45
Bull IV
$445.11
Entry Zone: $125-135 (accumulate)
Bore Family Office
Research | DCF Valuation | April 09, 2026
WSO — Wesco International, Inc.
Industrial Distribution | Electrical & Renewable Energy Infrastructure
|
Current Price
$390.90
|
Intrinsic Value (Base)
$284.92
-27.1% upside
|
| Verdict: Reduce — Reduce on rallies; valuation extended relative to organic growth. | |
Valuation Summary
| Scenario | Intrinsic Value | vs Current |
|---|---|---|
| Bear | $163.45 | -58.2% |
| Base | $284.92 | -27.1% |
| Bull | $445.11 | +13.9% |
Analyst Consensus
| Metric | Value |
|---|---|
| Average PT | $144.00 |
| PT Range | $135.00 – $150.00 |
| # Analysts | 14 |
| EPS Growth Exp. (CAGR 2026–27) | +14% (strong) |
| Revenue Growth Exp. (CAGR 2026–27) | +12% (strong) |
Valuation Methodology: DCF (FCFF)
Model Selection: DCF appropriate for growth distributor. WSO is reinvesting heavily in organic growth and capex; FCF is the right metric vs. earnings.
Key Inputs:
- FCF Base (FY2025): $1700M (~6.9% margin)
- Rf: 4.4% | β: 1.05 | ERP: 5.5%
- Ke: 10.18% | Kd: 3.20% | WACC: 9.78%
- Terminal Growth: 2.0–3.0%
Business Quality Scorecard
| Dimension | Assessment | Score | |
|---|---|---|---|
| ROIC | 🟢 | 14–15% ROIC; efficient capital deployment | 4/4 |
| FCF Margin | 🟡 | 6.9% FCF margin (growing); target 7–8% | 2/4 |
| Debt/EBITDA | 🟡 | 2.2× (moderate); improving toward 1.8–2.0× | 2/4 |
| Revenue Trend | 🟢 | Consistent 10%+ organic growth; strong M&A | 4/4 |
| FCF Trend | 🟢 | FCF growing 12%+ CAGR (strong) | 4/4 |
| Total: 16/20 (Adequate Quality) — Strong growth trajectory and capital efficiency offset by modest FCF margins. Energy transition and infrastructure tailwinds support continued growth. | |||
Investment Thesis
Bull Case:
- Energy transition: renewable energy, grid modernization, EV charging infrastructure driving electrical equipment demand
- Strong organic growth: WSO consistently gains market share; guided 10–12% organic growth sustainable
- M&A accretive: proven integration capability; $1–2B annual M&A adds 3–5% growth annually
- Leverage declining: strong FCF generation → debt reduction → more M&A firepower
- Secular tailwind: electrical infrastructure underfunded in developed markets; decadeslong replacement cycle ahead
Bear Case:
- Valuation: 12× P/E reflects growth premium; multiple compression if organic growth disappoints
- Integration risk: M&A pace creates execution risk; inorganic growth could disappoint
- Macro sensitivity: commercial/industrial capex sensitive to recession; FCF could compress 30–40% in downturn
- Debt levels: 2.2× leverage provides modest cushion; covenant restrictions in severe recession
Key Assumptions (Base):
- Organic revenue growth: 8–10% CAGR
- M&A growth: 3–5% annually (small tuck-ins)
- FCF margin: 7–8% (gradual expansion as scale increases)
- Leverage declining to 1.8–2.0× by 2028
- No major macro recession during the forecast period
Recommendation
REDUCE — Current price $390.90 offers -27.1% upside to base case. Strong growth visibility, secular tailwinds (energy transition), and quality management support a larger position. Suitable for growth-oriented portfolios with 3–5 year horizon.
Entry Strategy:
- Accumulate: <$125 (5%+ discount to base; good entry)
- Add: $125–$135 (at/near fair value; hold on dips <$130)
- Hold/Reduce on strength: $135–$150 (bull case priced in; lock in gains above $150)