• If you are wondering whether MSC Industrial Direct is offering good value at its current share price, you are not alone. This article is built to help you frame that question clearly.
• The stock last closed at US$83.59, with returns of a 2.3% decline over 7 days, a 4.4% decline over 30 days, a 2.6% decline year to date, and gains of 5.7% over 1 year, 13.5% over 3 years, and 25.0% over 5 years.
• Recent attention on MSC Industrial Direct has centered on broad industrial distribution trends and how demand for maintenance, repair and operations products is holding up across manufacturing and construction customers. This context helps explain why some investors are reassessing both the risk profile and long term potential of the shares.
• On our valuation checks, MSC Industrial Direct scores 2 out of 6 for being undervalued, giving it a value score of 2. Next we will compare what different valuation methods imply about the stock, before finishing with a more complete way to think about value that goes beyond a single score.

MSC Industrial Direct scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: MSC Industrial Direct Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model takes estimates of the cash a company is expected to generate in the future, then discounts those cash flows back to today to arrive at an estimate of what the business might be worth right now.

For MSC Industrial Direct, the model used is a 2 Stage Free Cash Flow to Equity approach. The latest twelve month free cash flow is given as about $169 million, and analysts plus extrapolations project free cash flow reaching around $248 million by 2030. The ten year path between now and 2035 is built from a mix of analyst forecasts for the earlier years and Simply Wall St extrapolations for the later years, all expressed in US dollars and then discounted back to today.

Pulling those projections together, the DCF output suggests an intrinsic value of about $76.62 per share, compared with the recent share price of $83.59. That implies MSC Industrial Direct screens as roughly 9.1% overvalued on this model.

Result: ABOUT RIGHT

MSC Industrial Direct is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Approach 2: MSC Industrial Direct Price vs Earnings

For profitable companies like MSC Industrial Direct, the P/E ratio is a useful shorthand because it links the share price directly to the earnings that support it. You are essentially asking how many dollars investors are currently willing to pay for each dollar of earnings.

What counts as a “normal” P/E usually reflects how the market views a company’s growth prospects and risk profile. Higher expected growth or lower perceived risk can support a higher P/E, while slower growth or higher risk tends to anchor it lower.

MSC Industrial Direct currently trades on a P/E of 22.81x. That sits close to the Trade Distributors industry average P/E of 22.82x and below the peer group average of 25.15x. Simply Wall St’s Fair Ratio framework goes a step further and estimates a P/E of 20.68x for MSC Industrial Direct. This Fair Ratio is a proprietary view of what the P/E could be given factors such as earnings growth, industry, profit margins, market cap and risk characteristics.

Because the Fair Ratio blends those company specific drivers, it can be more tailored than a simple comparison with peers or the industry. With the current P/E of 22.81x sitting above the Fair Ratio of 20.68x, the shares screen as overvalued on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your MSC Industrial Direct Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of MSC Industrial Direct’s business with the numbers behind it. A Narrative is your story for the company, paired with your own fair value, revenue, earnings and margin assumptions, so you are not just looking at ratios in isolation but linking the company’s story to a forecast and then to a fair value estimate. On Simply Wall St, millions of investors share these Narratives on the Community page, which makes the tool easy to access and compare. Narratives help you decide what to do next by setting a Fair Value and then checking how it stacks up against the current share price. They also update automatically as fresh information, such as news or earnings, flows in so your view can stay current without constant manual tweaks. For MSC Industrial Direct, one investor might see a modest Fair Value while another assigns a much higher figure, which shows how the same data can support very different yet clearly explained Narratives.

Do you think there's more to the story for MSC Industrial Direct? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.