Since December 2019, the S&P 500 has delivered a total return of 86.2%. But one standout stock has more than doubled the market - over the past five years, W.W. Grainger has surged 222% to $1,091 per share. Its momentum hasn’t stopped as it’s also gained 19.9% in the last six months, beating the S&P by 9.5%.

Following the strength, is GWW a buy right now? Or is the market overestimating its value? Find out in our full research report, it’s free.

Why Are We Positive On GWW?

Founded as a supplier of motors, W.W. Grainger (NYSE: GWW) provides maintenance, repair, and operating (MRO) supplies and services to businesses and institutions.

1. Operating Margin Rising, Profits Up

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Looking at the trend in its profitability, W.W. Grainger’s operating margin rose by 7.2 percentage points over the last five years, as its sales growth gave it immense operating leverage. Its operating margin for the trailing 12 months was 15.1%.

2. Stellar ROIC Showcases Lucrative Growth Opportunities

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

W.W. Grainger’s five-year average ROIC was 32.8%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

3. New Investments Bear Fruit as ROIC Jumps

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We typically prefer to invest in companies with high returns because it means they have viable business models, but the trend in a company’s ROIC is often what surprises the market and moves the stock price. Over the last few years, W.W. Grainger’s ROIC has increased significantly. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Final Judgment

These are just a few reasons W.W. Grainger is a rock-solid business worth owning, and with its shares outperforming the market lately, the stock trades at 26.4× forward price-to-earnings (or $1,091 per share). Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.

Stocks We Like Even More Than W.W. Grainger

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market to cap off the year - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,691% between September 2019 and September 2024) as well as under-the-radar businesses like Comfort Systems (+783% five-year return). Find your next big winner with StockStory today for free.