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Ferguson (LSE: FERG) is currently one of the most expensive stocks on FTSE 100 stock price index. Should I buy shares for my shares? Let’s see.
Heating and plumbing
So it does Ferguson to do? Well, is a support services business specializing in the production and distribution of heating and plumbing products. It has a large market share in North America and also operates here in the UK.
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As I write, Ferguson shares are trading at 9,412 pence, making them the third most expensive shares on the FTSE 100 currently. The only two companies whose shares are more expensive AstraZeneca in the second, and Spirax-Sarkothe most expensive.
At this time last year, Ferguson’s shares were trading at 9,432 pensions, which means that the shares are close to last year’s level. Recent macroeconomic and geopolitical pressures have led to a decline in stocks since the beginning of the year. Shares fell nearly 30% from 13,105 retirees in early 2022 to current levels.
Risk and reward
The above-mentioned macroeconomic problems worry me. Some of these problems include rising inflation, rising commodity prices and the global supply chain crisis. Ferguson’s performance could affect the fact that more expensive raw materials could lead to higher production costs. This will cut profits. In addition, supply chain problems can also lead to sales disruptions if products cannot be delivered. Many other FTSE 100 businesses have come under pressure because of these problems.
So to the positive. Let’s start by looking at Ferguson’s speech. However, I understand that past performance is not a guarantee of the future. Looking back, Ferguson recorded excellent growth between 2018 and 2021 in terms of revenue and gross profit. In 2020, affected by the pandemic, the level fell on both fronts, but this was for many businesses and was considered an anomaly due to the pandemic. However, unlike many other companies on the FTSE 100, it still made a profit.
In my view, favorable market conditions can boost Ferguson’s productivity and profits. The housing market in the UK is growing when demand exceeds supply, which means that heating and plumbing products will be in high demand. In the US, house prices have risen in recent months to a level that has not been around for 30 years.
At the current level, Ferguson’s shares look good value for money with a price-to-earnings ratio of only 13. The average index is up by 15. In addition to this, the shares are likely to also increase the flow of my passive income through dividends. Currently, the return on shares is 2%. Of course, dividends are never guaranteed.
I would buy shares of FTSE 100
I believe that Ferguson is a quality business on paper and based on it. Most of its profits come from the US, which is the largest economy in the world. In my opinion, having a good market share will allow it to continue to work well.
Summing up, Ferguson’s shares look good value for money, and performance seems to be in line with further growth projected ahead. This performance should be the basis for further dividend payments that will increase my passive income flow. I would add to my FTSE shares 100 current shares.