Cdw why buy

This long-tenured sales force helps to build those long-term, sticky customer relationships. It's also important to note that a great business generates high ROIC and has opportunities to reinvest at high returns to drive organic revenue growth and strong FCF over a long time.

Pricing power and recurring revenue are two paths to high ROIC and consistent growth, but not the only paths. The lack of pricing power is more than made up for by its unique business model of providing a real value proposition to both its vendor partners and its customers. In her first letter to shareholders, Leahy stressed CDW's commitment to taking a stakeholder approach to drive long-term profitable growth :.

We will never take for granted our reputation with our customers, co-workers, partners, shareholders and communities where we employ, live and have impact -- a reputation that has been built over 35 years through relentless commitment, dedication, hard work, philanthropic contributions and complete integrity. I assure you that every single day during my time as the leader of your Company and as your fellow stakeholder, CDW will continue to never allow for complacency regarding our business performance or anything less than the full commitment to serving our customers and enhancing the value of our shareholders' investments and the lives of our stakeholders.

The means will be as important and non-negotiable as the ends. This is my commitment to you. I admire several of the company's corporate governance policies, including having a clawback policy, a separate CEO and chairman, majority voting, no executive perquisites, diversity on the executive committee six of 13 execs are women and board four of 11 board members are women , and strict stock-ownership guidelines.

Board members are required to own five times their annual cash retainer in stock, and the CEO is required to own six times her annual base salary in stock. I also love that the company's executive compensation plan is partly based on both market share gains which drive organic revenue growth and free cash flow which is the driver of intrinsic value growth and what we are ultimately after as investors. Yes, of course, because ROIC is a primary driver of stock prices! But this is a management team that clearly understands the drivers of business value and the importance of return-based metrics, so I'm agreeable with this comp plan.

I also applaud that the company is transitioning to an annual election of directors starting in CDW sells a wide assortment of computer equipment to consumers and businesses.

Image source: Getty Images. This is an important question, so we need to spend some quality time discussing it. One thing I really love about this management team is its commitment to reinvesting back into the business to maintain long-term profitable growth. In her first annual report to investors, Leahy mentioned the phrase "profitable growth" at least four times.

Later in that same report, it becomes clear that Leahy and her management team understand the vital link between reinvestment, proper incentive compensation, and profitable growth, when she says: "We have built a strong sales organization and deep services and solutions capabilities over time and expect to continue to invest to enhance these capabilities, which we believe when combined with our competitive advantages of scale and a performance driven culture, will help drive sustainable, profitable growth for us today and in the future.

Our strong, execution-oriented culture is underpinned by our compensation system. Then on the fourth-quarter earnings call , an analyst asked CDW management if the company is "underearning a little bit because of the investments? I guess, the flip of that is, are we overinvesting? And I would say, no. We feel like we have the right balance between investment back into the business that allows us to continue to create differentiation in the marketplace that enables the sustainable outperformance versus the market.

So could we pull back on investment in the short term? Would the margin float up? So we think we have the right balance between investing in the business and growth in margin. Earlier on the same call, Kebo said: " They also reflect successful investments in our business that build on our long-term financial strategy to drive strong cash flow, deliver sustained profitable growth, and return cash to shareholders.

On the earnings call, Leahy explained why the company created the new role of chief growth and innovation officer:. We're really focused on scaling sustainable growth. So this is about focus for growth. And in particular, when we think about our customers, our partners and products and the channels and platforms that we use [and] sell, and the technology and digital capabilities that underpin those, the connective tissue between them is becoming more and more important.

So this role is really intended to help align and focus our efforts and investments around driving the connectivity there. When you take a step back, CDW has historically delivered meaningful profitable growth. And we've done that through continual innovation and continual investment, disciplined investment, and focus on investing where the growth is. So when I think about growth and innovation and bringing that team together, it's just another natural step in the way that we think about growth in the future.

As a long-term, business-minded, quality-growth investor, this is exactly the language I love to hear from a corporate management team that I'm thinking of partnering with. Competition for tech talent these days is intense. CDW has a workplace culture that's performance-driven I already discussed the incentive programs for sellers and executives and highly engaged. It runs an engagement survey of employees every two years and pulse surveys in off years.

CDW is also ranked as one of the top "most just companies" in the U. The company is also on Forbes ' list of America's Best Employers for Diversity, and CDW has several groups to promote diversity and inclusion in the workplace and has a "be Green" environmental initiative.

The company would be well served to set stricter environmental goals and to share the progress against those goals by publishing annual sustainability reports. Possible near-term risks are that CDW is unable to get enough inventory because of supply constraints brought on by the novel coronavirus outbreak or that customers cut back on spending due to uncertainty in a U.

These are wild cards to be aware of. Another risk is vendor concentration. But a potentially larger long-term risk to the stock is if we experience a broader economic downturn in which customers may temporarily cut their IT spending. CDW's diversified revenue clientele may help mitigate what could be significant cuts for example, government or education spending may remain healthy even though corporate spending is cut.

It also helps that, as the world has digitized, technology has become more integral to organizations than it was during the Great Recession. On the other hand, a recession scenario could actually present an opportunity for CDW.

A neat thing about its business model is that cash flow actually has the potential to be stronger during a recession because the company would significantly reduce working capital, which is its single largest capital expense. This strong FCF would allow the company to continue to increase the dividend, buy back discounted stock, and hopefully make acquisitions that allow it to come out of the recession even stronger.

An awesome showing, considering it was the worst financial crisis since the Great Depression. But earnings did not hold up so well. A change in margin can reflect either a change in business conditions, or a company's cost controls, or both. If a company's expenses are growing faster than their sales, this will reduce their margins. But note, different industries have different margin rates that are considered good. And margin rates can vary significantly across these different groups.

So, when comparing one stock to another in a different industry, it's best make relative comparisons to that stock's respective industry values. Return on Equity or ROE is calculated as income divided by average shareholder equity past 12 months, including reinvested earnings. The income number is listed on a company's Income Statement.

ROE is always expressed as a percentage. Seeing how a company makes use of its equity, and the return generated on it, is an important measure to look at. ROE values, like other values, can vary significantly from one industry to another. As the name suggests, it's calculated as sales divided by assets. This is also commonly referred to as the Asset Utilization ratio.

A higher number is better than a lower one as it shows how effective a company is at generating revenue from its assets. It takes the consensus sales estimate for the current fiscal year F1 divided by the sales for the last completed fiscal year F0 actual if reported, the consensus if not.

While earnings are the driving metric behind stock prices, there wouldn't be any earnings to calculate if there weren't any sales to begin with. Like earnings, a higher growth rate is better than a lower growth rate. Seeing a company's projected sales growth instantly tells you what the outlook is for their products and services.

Of course, different industries will have different growth rates that are considered good. So be sure to compare a stock to its industry's growth rate when sizing up stocks from different groups.

The Daily Price Change displays the day's percentage price change using the most recently completed close. This item is updated at 9 pm EST each day. While the hover-quote on Zacks. This is useful for obvious reasons, but can also put the current day's intraday gains into better context by knowing if the recently completed trading day was up or down.

The 1 Week Price Change displays the percentage price change over the last 5 trading days using the most recently completed close to the close from 5 days before. The 1 week price change reflects the collective buying and selling sentiment over the short-term. A strong weekly advance especially when accompanied by increased volume is a sought after metric for putting potential momentum stocks onto one's radar.

Others will look for a pullback on the week as a good entry point, assuming the longer-term price changes 4 week, 12 weeks, etc. The Momentum Score takes all of this and more into account. The 4 Week Price Change displays the percentage price change for the most recently completed 4 weeks 20 trading days. This is a medium-term price change metric. The 4 week price change is a good reference point for the individual stock and how it's performed in relation to its peers.

The 12 Week Price Change displays the percentage price change over the most recently completed 12 weeks 60 days. This is a medium-term price change metric like the 4 week price change. With 12 weeks representing a meaningful part of a year, this time period will show whether a stock has been enjoying strong investor demand, or if it's in consolidation, or distress.

The 52 Week Price Change displays the percentage price change over the most recently completed 52 weeks trading days. This is a longer-term price change metric. The 52 week price change is a good reference point. Some investors seek out stocks with the best percentage price change over the last 52 weeks, expecting that momentum to continue.

Others look for those that have lagged the market, believing those are the ones ripe for the biggest increases to come. Regardless of the many ways investors use this item, whether looking at a stock's price change, an index's return, or a portfolio manager's performance, this time-frame is a common judging metric in the financial industry.

The 20 Day Average Volume is the average daily trading volume over the last 20 trading days. Volume is a useful item in many ways. For one, part of trading is being able to get in and out of a stock easily. If the volume is too light, in absolute terms or for a relatively large position, it could be difficult to execute a trade.

This is also useful to know when comparing a stock's daily volume which can be found on a ticker's hover-quote to that of its average volume. A rising stock on above average volume is typically a bullish sign whereas a declining stock on above average volume is typically bearish.

As they say, 'price follows volume'. The 20 day average establishes this baseline. Earnings estimate revisions are the most important factor influencing stocks prices.

It's an integral part of the Zacks Rank and a critical part in effective stock evaluation. Remember Me. Let's make money! Subscribed already? Log in. Create an account. News Alert: A red week is predicted! Listen to the podcast. Score: Weaker Hold.

Stronger Stock. Which way will CDW go? Predicted Opening Price for CDW Corporation of Friday, November 12, The predicted opening price is based on yesterday's movements between high, low, and the closing price. Analyst Ratings. Volatility and Risk. It said it expects to have an initial net leverage ratio of about 3. Founded in , Sirius provides technology-based services for about 3, large and mid-sized customers. Your long run can be much longer if you buy stocks when the market is expensive and exuberant.

Dow Jones Newswires is a market-moving financial and business news source, used by wealth managers, institutional investors and fintech platforms around the world to identify trading and investing opportunities, strengthen advisor-client relationships and build investor experiences.