Are we buying MSC Industrial Direct | $MSM Stock | Summary and Q&A

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March 30, 2021
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Everything Money
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Are we buying MSC Industrial Direct | $MSM Stock

TL;DR

MSC Industrial Direct is one of the largest distributors of industrial equipment in the US, but the company's growth potential is limited.

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Key Insights

  • πŸŒ₯️ MSC Industrial Direct is one of the largest distributors of industrial equipment in the US, specializing in metalworking products.
  • πŸ›€ The company's financial performance shows consistent profitability and efficient capital utilization.
  • πŸ™‚ While the stock may be slightly overvalued, the strong balance sheet provides stability.
  • πŸ‰ Limited revenue growth potential may impact the long-term prospects of the company.
  • πŸͺ€ The dividend yield of 3.5% should be approached with caution, as it might indicate a potential dividend trap.
  • πŸ’ Investors may consider a target buying price of $66 to $70 based on a lower multiple of free cash flow.
  • πŸ”ˆ The stock's trading volume is relatively low, which may limit trading opportunities for some investors.

Questions & Answers

Q: What makes MSC Industrial Direct a significant player in the industrial equipment distribution industry?

MSC Industrial Direct stands out for its extensive product range, including 1.5 million metalworking and other industrial products.

Q: Is MSC Industrial Direct a good investment option based on its financial performance?

While the company has consistent profitability, the limited revenue growth potential and a slightly overvalued stock may make it less attractive for some investors.

Q: What is the significance of MSC Industrial Direct's return on invested capital (ROIC)?

A ROIC of 14.5% demonstrates that the company effectively utilizes its capital and generates high returns, indicating efficient management.

Q: Does MSC Industrial Direct have a strong balance sheet?

Yes, the company has a strong balance sheet with current assets of $1.15 billion, which is enough to cover its current liabilities of $500 million.

Summary & Key Takeaways

  • MSC Industrial Direct is a major distributor in the US, offering over 1.5 million industrial products, particularly in metalworking.

  • The company has a market cap of $4.7 billion and a price-to-earnings ratio of 20.9, indicating it is slightly overvalued.

  • Key financial highlights include a profit margin of 7.4%, consistent profit over the past 10 years, and a strong return on invested capital of 14.5%.

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