CDW Corp

CDW Corp is assigned a 5-star quantitative star rating, illustrating our stance that this share class offers a compelling opportunity for investors. The stock currently trades at a 32% discount to our quantitative fair value estimate of $188.00 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The company's profitability strengthens our valuation estimate. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. For example, the firm's earnings yield of 7.7% lies in the top 30% compared with global peers. This suggests that it is generating substantial earnings relative to its share price, which contributes to our view that shares are undervalued.

The company's valuation metrics are an additional encouraging factor. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's enterprise value to revenue ratio of 1.0, a core component of valuation, lies in the bottom 30% compared with peers globally. The prevailing enterprise value/sales ratio is low relative to the long-term earnings power of the business. This characteristic further promotes our favorable price/fair value ratio.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has been a laggard relative to the broader universe over the past year. This underperformance makes the stock appear cheap, which portends a buying opportunity in light of other contributors to our model.

The company's narrow economic moat rating suggests it should be able to maintain robust profitability for a decade or longer before competition erodes its advantage. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.