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W.W. Grainger, Inc. (GWW) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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W.W. Grainger, Inc. (GWW)

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Intrinsic Value (DCF)

Current$1,063.30
→
Intrinsic$899.56
-15%
$599.00$899.56$1,470.20
Market implies 24% growth for 5 years
GWW trades at a premium to our conservative estimate — investors expect above-average performance.
At $1063, the market prices in continued strong cash flow growth (24%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $599 → Bull $1470. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →16%18%20%22%
8%$1106$1202$1304$1413
10%$764$830$900$974
12%$575$624$676$731
14%$455$494$534$578

Bull Case

  • Bull case ($1470) offers 38% upside at 24% growth, 9% discount

Bear Case

  • Bear case ($599) implies 44% downside at 16% growth, 12% discount
  • Price reflects 24% growth expectations vs 20% historical — high bar to clear
  • Trading 15% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$1.89B
Year 2$2.27B
Year 3$2.72B
Year 4$3.27B
Year 5$3.93B
Terminal$57.84B

📐 Model Inputs

Growth Rate20.1%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$1.57BTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is GWW stock undervalued or overvalued?
🟡 FAIRLY VALUED

GWW trades at $1063.30, within 10% of our $894.18 intrinsic value estimate. At 10.0% WACC and 20.1% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $571.41 (bear) to $1369.48 (bull).

What is GWW's intrinsic value?

Using a 5-year DCF model: Base FCF of $1.57B, projected at 20.1% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $2.15B net debt and dividing by 0.05B shares: Bear $571.41 | Base $894.18 | Bull $1369.48. Current price $1063.30 implies -13% to base case.

How is GWW's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 20.1% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($45.96B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 29.3x.