Is Ferguson Plc overvalued or undervalued?

As of 31 October 2024, the valuation grade for Ferguson Plc has moved from very expensive to expensive, indicating a shift in perception regarding its market valuation. The company is currently considered overvalued, with a P/E ratio of 25, which is significantly higher than its industry peers, such as W.W. Grainger, Inc. at 55.73 and Fastenal Co. at 41.39. Additionally, Ferguson's EV to EBITDA stands at 15.72, further supporting the notion of overvaluation when compared to the industry standards.
Ferguson's key financial metrics include a Price to Book Value of 7.63, a ROCE of 27.07%, and a ROE of 30.11%. While these ratios indicate strong profitability, the high valuation levels suggest that the stock may not offer sufficient upside potential relative to its current price of 215.00. Notably, Ferguson has outperformed the S&P 500 over the past year with a return of 9.77% compared to the index's 10.26%, but this does not negate the overall assessment of being overvalued in the current market context.