Thursday, March 27, 2014

WW Grainger (GWW) 2014 Review

W.W. Grainger Inc. is the leading provider of maintenance, repair, supplies and service for safety, lab, automotive and industrial products to businesses and institutions to keep their facilities and equipment running.  The company has grown profits and dividends at a 13-14% rate over the past 10 years earning a 12-20% return on equity.  While GWW was impacted by the slowdown in the economy, it made a strong come back in 2010 and should continue to record profit growth for the long term by:

(1) expanded product offerings.  The company added 234,000 since 2006.  It is also rapidly growing its private label products,

(2) rapid penetration of the e-commerce market which is the fastest growing segment of its business,

(3) acquisitions,

(4) strong cash flow which sustains a continuing stock buyback program.

 Negatives:

(1) slow global economic growth,

(2) currency fluctuations.

      GWW is rated A++, has a 12% debt to equity ratio and its stock yields 1.5%.

  Statistical Summary

                 Stock      Dividend         Payout      # Increases  
                 Yield      Growth Rate     Ratio       Since 2004

GWW        1.5%            9%               29%             10
Ind Ave      2.0               8                  31                NA

                Debt/                        EPS Down       Net        Value Line
               Equity         ROE      Since 2004      Margin       Rating

GWW       12%           24%           1                   9%           A++
Ind Ave     25              15            NA                 10             NA

     Chart

            Note:  GWW stock made great progress off its March 2009 low, quickly surpassing the downtrend off its August 2008 high (straight red line) and the November 2008 high (green line).  Long term, the stock is in an uptrend (blue lines).  Intermediate term it is a trading range (purple lines).  The wiggly red line is the 50 day moving average.   The Dividend Growth Portfolio owns a 50% position in GWW by virtue of having Sold Half in mid-2012.  The upper boundary of its Buy Value Range is $88; the lower boundary of its Sell Half Range is $216.




3/14

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