Analyzing CDW In Comparison To Competitors In Electronic Equipment, Instruments & Components Industry

Amidst the fast-paced and highly competitive business environment of today, conducting comprehensive company analysis is essential for investors and industry enthusiasts. In this article, we will delve into an extensive industry comparison, evaluating CDW CDW in comparison to its major competitors within the Electronic Equipment, Instruments & Components industry. By analyzing critical financial metrics, market position, and growth potential, our objective is to provide valuable insights for investors and offer a deeper understanding of company's performance in the industry.

CDW Background

CDW Corp is a value-added reseller operating in the U.S. (95% of sales) and Canada (5%). The company has more than 100,000 products on its line of cards that range from notebooks to data center software. Roughly half of CDW's revenue comes from midsize and large businesses, with the remaining from small businesses, government agencies, education institutions, and health-care organizations.

Upon analyzing CDW, the following trends can be observed:

• The Price to Earnings ratio of 25.5 for this company is 2.07x above the industry average, indicating a premium valuation associated with the stock.

• The elevated Price to Book ratio of 16.65 relative to the industry average by 10.03x suggests company might be overvalued based on its book value.

• The stock's relatively high Price to Sales ratio of 1.23, surpassing the industry average by 3.0x, may indicate an aspect of overvaluation in terms of sales performance.

• The company has a higher Return on Equity (ROE) of 16.5%, which is 13.61% above the industry average. This suggests efficient use of equity to generate profits and demonstrates profitability and growth potential.

• Compared to its industry, the company has higher Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $480 Million, which is 3.2x above the industry average, indicating stronger profitability and robust cash flow generation.

• The gross profit of $1.18 Billion is 2.88x above that of its industry, highlighting stronger profitability and higher earnings from its core operations.

• With a revenue growth of -8.46%, which is much lower than the industry average of -0.95%, the company is experiencing a notable slowdown in sales expansion.

Debt To Equity Ratio

The debt-to-equity (D/E) ratio provides insights into the proportion of debt a company has in relation to its equity and asset value.

Considering the debt-to-equity ratio in industry comparisons allows for a concise evaluation of a company's financial health and risk profile, aiding in informed decision-making.

When assessing CDW against its top 4 peers using the Debt-to-Equity ratio, the following comparisons can be made:

• Among its top 4 peers, CDW has a higher debt-to-equity ratio of 4.06.

• This suggests a greater reliance on debt financing, which can expose the company to increased financial risk and potential volatility.

Key Takeaways

CDW's high PE, PB, and PS ratios suggest that the company is trading at a premium compared to its peers in the Electronic Equipment, Instruments & Components industry. This indicates that investors are willing to pay a higher price for CDW's earnings, book value, and sales. On the other hand, CDW's high ROE, EBITDA, gross profit, and low revenue growth indicate that the company is generating strong profitability and efficiency, but experiencing slower revenue growth compared to its industry peers.

This article was generated by Benzinga's automated content engine and reviewed by an editor.