CDW Corp (CDW)

Conclusion

CDW Corp provides IT solutions, including hardware, software, advisory, integration and managed services, mainly to business, government, education and healthcare customers in the United States, the United Kingdom and Canada. At a price of 164.61 USD on 2026-11-09, the market capitalisation is 20.6 billion USD.

The verdict is fair. The P/E is 18.7x against a ten-year median of 23.4x, and EV/EBITDA is 14.6x against a median of 15.4x. The DCF gives 152.76 USD per share at a discount rate of 9.5%, and the fair value from historical multiples is 205.45 USD. The fair value band runs from 143.29 to 214.93 USD with a midpoint of 179.11 USD, a margin of safety of 8.8% at the current price. The reverse DCF implies revenue growth of 5.9% a year, against revenue growth of 4.0% a year over five years and free cash flow per share growth of 0.6% a year over the same period.

What holds the case up is a ROIC of 14.3% against a WACC of 8.0%, free cash flow conversion of 107.6% on a trailing basis, and eight growing revenue years out of ten. What would break it is leverage: net debt to EBITDA of 3.2x and interest coverage of 6.7x. The third weak point is the three-year revenue CAGR of -1.9%, which contrasts with the five-year figure of 4.0%.

Financial health

Financial health is yellow: the current ratio of 1.26 is sound, but net debt to EBITDA of 3.19x and interest coverage of 6.69x are both on watch. Debt to equity stands at 2.76 and the quick ratio at 1.10. The Altman Z-score of 2.30 sits in the grey zone, and the Altman model was designed for manufacturers, which CDW is not. Insolvency risk: low, about 3.2% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31. The company's leverage is the main reason to watch this section closely, since the current ratio alone does not capture the debt load.

Earnings quality

Earnings quality is green, held up by free cash flow conversion of 107.6% on a trailing basis and 104.4% over five years, and by a share count that fell at a compound rate of 1.8% over five years. Accruals are slightly negative at -0.9% of the relevant base, which points to cash earnings rather than accounting adjustments. Stock-based compensation is small at 0.3% of revenue, and free cash flow after it is 1.1 billion USD. The Piotroski score is 5 out of 9. The Beneish M-score is not available. Earnings beat expectations in seven of the last eight quarters, with an average surprise of 6.2%. Analysts raised the current-year estimate by 2.1% over 90 days and the next-year estimate by 2.4%.

Profitability

Profitability is green. The operating margin of 7.0% is above its ten-year median of 6.6%, and the gross margin of 21.0% compares with a median of 17.3%. The net margin of 4.5% equals its median. ROIC of 14.3% against WACC of 8.0% gives a ROIC minus WACC value of 6.4%, which is the strongest sign that the business earns more than its cost of capital. ROIC over five years has a median of 16.2%. Return on equity of 41.7% needs care: the DuPont split shows a net margin of 4.8%, an asset turnover of 1.40 and an equity multiplier of 6.15, so most of the high return comes from leverage rather than from margins.

Growth

Growth is green, although the recent trend is weaker than the long-term one. Revenue compounded at -1.9% over three years, 4.0% over five years and 5.6% over ten years. EPS compounded at -0.3% over three years, 8.2% over five years and 13.2% over ten years. Free cash flow per share compounded at -2.3% over three years, 0.6% over five years and 22.4% over ten years. Revenue grew in eight of the last ten years. The next-year EPS growth estimate is 9.9%, which would be a clear reversal of the three-year decline if delivered.

Valuation

Valuation is yellow. All five multiples sit below their ten-year medians: P/E 18.7x against 23.4x, P/FCF 17.4x against 20.5x, P/S 0.84x against 1.05x, and P/B 7.8x against 15.4x. The verdict is fair, with a margin of safety of 8.8%. The DCF gives 152.76 USD per share at a discount rate of 9.5%, and the fair value from historical multiples is 205.45 USD. The fair value band runs from 143.29 to 214.93 USD with a midpoint of 179.11 USD. The reverse DCF implies growth of 5.9% a year. The dividend yield is 1.6% and the payout on free cash flow is 27.8%. The fair value is an order of magnitude built on fixed assumptions, not a price target.

Risks

The main risk is leverage. Net debt to EBITDA of 3.19x and interest coverage of 6.69x leave less room if earnings fall, and a weaker interest coverage would squeeze the free cash flow that supports buybacks and dividends. The three-year revenue decline of -1.9% is a second risk, because the DCF and the reverse DCF both depend on growth returning to the level implied by the price. The Beneish M-score is not available, so manipulation risk in earnings cannot be checked with this model. The DCF rests on a terminal value share of 53.5%, so small changes in the long-term assumptions move the result considerably. This analysis has no debt maturity schedule and no revenue by segment, so refinancing risk and the mix between the Commercial, Government and Education segments cannot be assessed.