QS Research · Michael Burry's Scion Capital analyst template · 2006
W.W. GRAINGER, INC. (GWW)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $1,472.91 (close 2026-11-10)
Conclusion: PASS
Conviction low · base case -22% · downside -27% · upside +3%
Grainger is a high-quality distributor — ROIC 33.8% vs a 6.7% WACC, net debt only $2.14B, Q3 2026 adjusted EPS of $12.54 and FY2026 guidance raised to $47.00-$48.00 — but the market already pays 31.9x TTM P/E and 20.9x EV/EBITDA versus a 24.8x peer-median P/E and close-peer EV/EBITDA of 12.4x-17.8x. On the independent anchor the base case is $1,145/share (-22.3%), and at today's 31.9x multiple the FY2026 EPS guide midpoint gives only about +2.9% upside. A downside of -10% EPS with the P/E compressed to 27.1x — halfway toward the 24.8x anchor and 15% below today — gives about -23.5%. The Q3 beat and guidance raise are real but already reflected; with the risk/reward roughly balanced to negative, this is a pass, not a short. The flagged crowded short (5.9 days to cover) and the $0.03/share exposure stress are too small to change the call.
Key numbers
- Share price: $1,472.91
- Market cap: $68.95B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $19.37B
- EV / EBITDA (TTM): 20.9x
- P/E (TTM): 31.9x
- FCF yield: 2.5%
- Price / book: 15.88x
- EV / FCF (TTM): 41.4x
- Revenue growth (latest fiscal year): +4.5%
- ROIC (TTM): 33.8%
- WACC: 6.7%
- Economic profit spread: +27.1 pts
The 15 boxes
- ✓ 1. Long-form business notes
Grainger is a two-model MRO distributor: a high-touch, branch/DC and sales-rep business in North America (High-Touch Solutions N.A.) and an online endless-assortment business (Zoro in the U.S., majority-owned MonotaRO in Japan). Between the FY2020 and FY2025 10-Ks the company re-cut its segments (effective January 1, 2021), exited the U.K. in Q4 2025 (Cromwell sold December 17, 2025; Zoro U.K. closed), and roughly doubled the top line, from $11.80B FY2020 revenue to $17.94B FY2025 and $19.37B TTM to September 30, 2026, while shrinking diluted shares from 53.70M to 47.10M. FY2025 operating income of $2.50B was below FY2024's $2.64B on higher revenue, while TTM to September 30, 2026 operating income was $3.06B. No customer, supplier or product category is concentrated (no end customer over 10% of FY2025 sales, no supplier over 5% of purchases, no category over 20% of sales).
- ✓ 2. Competitive advantage
Grainger's numbers read like a scale distributor with pricing power more than a branded manufacturer: gross margin computed from the XBRL revenue/gross-profit lines rose from 35.9% in FY2020 to 39.4% in the TTM to 2026-09-30, and operating margin from 8.6% to 15.8%, though FY2025 itself slipped to 13.9% from 15.4% in FY2024 even as revenue grew to $17.94B. The 10-K claims differentiation on local product availability, breadth, sales/service reps and eCommerce technology, not on any licence or patent, and names manufacturers (including its own suppliers) selling direct, wholesale distributors, retailers and internet-based businesses as competitors. Supplier dependence is low (>5,000 primary suppliers, none over 5% of 2025 purchases) and revenue is US-concentrated at about 81% of 2025 consolidated net sales. Return on total equity looks extreme (net income $1.71B against $3.74B of FY2025 equity) but total equity is shrunk by $1.04B of FY2025 buybacks, so it is not clean evidence of moat.
- ✓ 3. 10-Q takeaways
The Q3 2026 10-Q (filed 2026-11-04) shows sales of $5,181 million for the three months ended September 30, 2026, up 11.3% reported and 14.9% on a daily, organic constant currency basis, with gross margin 38.8% (+20 bps) and adjusted operating earnings of $836 million, up 18.2%. The headline 62.0% reported operating earnings growth is flattered by the Q3 2025 base, which carried the $186 million U.K. impairment and $10 million Zoro U.K. closure cost; the only one-off in Q3 2026 is $8 million of Adroit acquisition transaction costs. Adjusted diluted EPS was $12.54, up 22.8%, operating cash flow was $661 million with $396 million returned to shareholders, and full-year 2026 guidance was raised to adjusted diluted EPS of $47.00-$48.00 on net sales of $19.8-$20.0 billion.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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