Investment Thesis
CDW demonstrates steady revenue growth (6.8% YoY) with positive free cash flow generation ($248.4M), indicating a fundamentally sound distribution business. However, elevated leverage (1.81x D/E ratio) and tight liquidity (1.16x current ratio) present financial risk, while flat EPS growth (1.4% vs 6.8% revenue growth) suggests profitability is not expanding proportionally.
Strengths
- Solid revenue growth at 6.8% YoY with positive operating cash flow ($274.8M)
- Asset-light business model with low capex requirements ($26.4M) and healthy free cash flow margin (4.4%)
- Reasonable gross margins (21%) and operating margins (6.6%) appropriate for distribution sector
Risks
- High financial leverage (1.81x D/E) with $4.6B long-term debt against $2.6B equity raises refinancing and economic cycle risk
- Tight liquidity ratios (1.16x current, 1.06x quick) suggest working capital constraints and limited financial flexibility
- Profitability growth lagging revenue growth (EPS +1.4% vs Revenue +6.8%) indicates margin compression or cost inflation pressures
Key Metrics to Watch
- Debt/Equity ratio trend and absolute debt levels relative to operating cash flow capacity
- Gross margin sustainability and EPS growth acceleration relative to revenue growth
- Working capital efficiency and cash conversion cycle given tight current ratio
Financial Metrics
Revenue
5.7B
Net Income
235.4M
EPS (Diluted)
$1.82
Free Cash Flow
248.4M
Total Assets
16.5B
Cash
578.6M
Profitability Ratios
Gross Margin
21.0%
Operating Margin
6.6%
Net Margin
4.1%
ROE
9.2%
ROA
1.4%
FCF Margin
4.4%
Balance Sheet & Liquidity
Current Ratio
1.16x
Quick Ratio
1.06x
Debt/Equity
1.81x
Debt/Assets
36.3%
Interest Coverage
3.81x
Long-term Debt
4.6B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-08T09:32:30.499187 |
Data as of: 2026-03-31 |
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