WESCO International, Inc. (NYSE:WCC)

foolfully (62.60) Submitted: 11/21/2012 4:16:52 PM : Start Price: $63.12 WCC Score: -0.26

50

ll00 (< 20) Submitted: 9/11/2009 10:28:53 AM : Start Price: $26.96 WCC Score: +117.59

i go with the flow

notzia (73.38) Submitted: 8/7/2009 9:04:05 AM : Start Price: $24.60 WCC Score: +137.41

WESCO International, Inc. (WCC) is a provider of electrical construction products and electrical and industrial maintenance, repair and operating supplies (MRO). The company serves approximately 115,000 customers globally, offering more than 1,000,000 products from more than 23,000 suppliers utilizing automated, electronic procurement and inventory replenishment system.

The analysis presented is based on a price of $24.27.

The EPS has shown solid growth over the last eight years, with a compounded annual rate of 42%. Although the free cash flow has been positive throughout this time, it has fluctuated substantially; the last four years have been far better than the earlier four. In general, the return on equity (ROE) has been increasing from the 14% evidenced in 2001 to the 39% found in 2007; in 2008, it fell to the more pedestrian 29%.

Before I look at the valuations, I look at three indicators of financial safety. For this stock, all three are quite good. The Altman Z is 7.59; below 1.8 is risky, above 3 is the safe range. The Piotroski F is 8; 2 or below indicates caution, while 8 or 9 indicates that the stock is expected to rise within the next year. The Sloan accrual is -7.23; 5 or higher is high risk, while -5 or lower is excellent.

I use more than one valuation method to gauge intrinsic value; the first three all provide at least a reasonable margin of safety (MOS). The first three are standards in the valuation literature. The estimate based on Graham’s formula was $133 (82% MOS). The Earnings Power Value (value of the firm) was estimated, on a per share bases, to be $45 (46% MOS); while I like EPV to be at least 50%, I considered this close enough not to be a barrier to recommendation. The Discounted Cash Flow estimate valued the stock at $146 (83% MOS).

The last two were based on a spreadsheet found on the AAII website; these are designed to mimic Buffett’s valuation methodology. One is based on projecting EPS growth 10 years into the future based on past EPS growth; I discount the resulting valuation to reflect the price at which the stock will realize a compounded earnings (including dividends when applicable) return of 15%. Based on this method the target purchase needs to be below $30, and at the current price there is a 19% MOS.

The second is based on estimating EPS growth through the sustainable growth rate. The per-share projected book value is estimated by taking the previous year’s book value, adding EPS and subtracting dividends (when applicable). The projected EPS is estimated by multiplying the projected book value by the average Return on Equity, and the projected dividend is estimated by multiplying the projected EPS by the average payout ratio. I then discount the resulting valuation to reflect the price at which the stock will realize a compounded earnings return of 15%. Based on this method the target purchase needs to be below $40, and at the current price there is a 39% MOS.

To ascertain that the price is attractive to me, I take one more thing into consideration. At the current price, would I expect an immediate 15% return on my investment (ROI) based on earnings and dividends? In this, the EPS represents about 15.6% of the share price by itself (there is no dividend yield to add in).

Based on value and safety, I think WCC has good investment potential. The only flaw that emerged from my analysis is the earnings power value, which in the context of the whole analysis was close enough not to disqualify the company from investment consideration.

TourPhare (26.73) Submitted: 5/28/2009 12:32:02 PM : Start Price: $25.72 WCC Score: +103.24

Low priced. Target at $30

mtracy9 (95.24) Submitted: 3/31/2009 7:21:27 PM : Start Price: $17.71 WCC Score: +206.99

Reading through Wesco's 10-K, one can see how committed the company is to reducing costs. According to Buffett, reducing costs is especially important to a commodity business like Wesco. Cost reduction appears to have paid off for Wesco, as its return on equity (ttm) is over 30 percent -- a very impressive number. Wesco's 10-K also reveals why this company also has a lot of room for growth. This company is a good long-term buy.

bitterpete (89.91) Submitted: 11/8/2008 9:39:45 AM : Start Price: $18.33 WCC Score: +227.30

Yes, earnings missed estimates and debt is a bit higher than Fools like to see. But, trading at 3.5 times earnings and off 150% of the 52 week high, this stock might be one of the best bargins out there. They are solidly managed and have a strong international presence. Yes, they are likely to run a little lean as construction stalls, but long term, I see this as a 4 or 5 bagger.

trendsJohn (< 20) Submitted: 6/14/2008 3:05:46 PM : Start Price: $43.14 WCC Score: +46.49

multiple technical positive signals

NoTouch5Yr (98.91) Submitted: 5/22/2008 5:09:50 PM : Start Price: $43.64 WCC Score: +46.93

As with all my picks: A very attractive P/E, excellent EPS growth rate and high five year growth prospects.

Smiley81 (< 20) Submitted: 4/29/2008 10:50:29 AM : Start Price: $36.90 WCC Score: +78.37

$70+/share

Sillitoe (46.25) Submitted: 1/3/2008 11:52:49 PM : Start Price: $38.50 WCC Score: +72.85

value, good financials, expanding, worldwide growth, protection, share buy back

OHL2011 (36.40) Submitted: 1/2/2008 4:55:13 PM : Start Price: $39.50 WCC Score: +69.27

VALUE and insider buying

Patrick6k (54.07) Submitted: 10/31/2007 1:54:51 PM : Start Price: $46.43 WCC Score: +47.68

Wesco Intl Inc. is a distributor of a vast portfolio of electrical products. Investing in this stock is a matter of common sense in my opinion. With the intense expansion projects occurring with the big refineries along with the global modernization occurring in lesser-developed countries, Wesco stands to make windfall profits for decades to come.

They have a very solid management crew, and a globally established business, and it's a boring business to boot. We may be looking at an industrial version of Home Depot, and with the amount of inside ownership that Wesco has, their big wigs must have a similar belief.

Wall Street analysts estimate 19% annualized growth over the next 5 years. In my heart of hearts, I think that's conservative, but, being the value hawk I am with my investment dollars, I used a 12% annualized return. Even with a lower earnings growth rate, I still place the intrinsic value of these shares at around $74-$75. So, this looks like a good buying opportunity to me.

Go Long,

Fool On!!!

aaroger (85.62) Submitted: 7/22/2007 5:34:50 PM : Start Price: $59.70 WCC Score: -11.60

69

antigenics1 (61.34) Submitted: 10/13/2006 10:14:26 AM : Start Price: $68.20 WCC Score: -19.96

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