CDW Corp (CDW) stock intrinsic value fair value estimate & owner earnings analysis

CDW is a large US reseller and services provider of IT hardware, software and cloud solutions (about 100,000 products from 1,000+ vendors, including Apple, Cisco, Dell, HP, Lenovo, Microsoft). It sells to corporate, public-sector (government, education, healthcare), and small-business customers, mostly in the United States, with operations in the UK and Canada. Net sales were $22.4 billion in 2025 (up 6.8%), gross margin about 21.7%, operating margin 7.4%. Net debt was about $5.0 billion at year end 2025. How we measured earnings. We start from operating cash flow, strip out the swings in receivables, payables and inventory (large and noisy for CDW: receivables rose $1.17 billion in 2025 as sales grew, mostly offset by payables), subtract stock-based compensation as a real cost, and subtract only the capital spending needed to sustain the business (growth capex is estimated from the company's own capex-to-sales ratio and excluded). Amortization of acquired intangibles is a non-cash charge and is added back; CDW's acquisition spending has been small ($22 million in 2025, $324 million in 2024), so we saw no pattern of serial write-offs. On this basis owner earnings were about $1.30 billion in 2025 ($9.84 per share), $1.25 billion in 2024 and $1.24 billion in 2023, versus $1.06 billion in 2021 and $1.30 billion in 2022. We use the median of 2021 to 2025, about $1.25 billion in total, as the normal level; 2017 to 2020 describe a smaller business and are excluded. That level is applied to the current share count of about 127 million (buybacks have already reduced the count, so we do not count them again as growth). Owner earnings grew 3.8% in total in 2025; our base case starts at 3.0%, at or below that pace. Base case (about $176 per share). Owner earnings grow 3% a year initially, tapering to 1% by year 10, reaching about $1.56 billion, then hold flat for another 20 years and end. What we credit: a 25-year record of selling IT through customer cycles, sales that grew about 5.6% a year from 2016 to 2025 including the 2023-2024 dip, funded from the company's own cash flow. Growth rates are set below that record, and the flat period rests on the durability of scale, vendor and customer relationships already in place. Left out: new products, share gains, margin expansion and any rebound in IT spending, none of which can be evidenced today. Bear case (about $97 per share). Owner earnings fall back to about $1.06 billion (the 2021 level) and slide 1.5% a year for ten years, then hold for 15 years and end. The named pressures: operating margin already slipped from 7.9% to 7.4% in 2025 as selling and administrative costs rose 9% against 6% gross-profit growth, a significant portion of sales depends on six vendors (Apple, Cisco, Dell, HP, Lenovo, Microsoft) and on two wholesale distributors, and $5.0 billion of net debt limits flexibility in a downturn. Sales fell in both 2023 and 2024, showing the business is not immune to slower IT spending. Bull case (about $216 per share). Owner earnings grow 5% a year, tapering to 3% by year 10 (about $1.89 billion), then hold flat for 30 years. This is the company's own demonstrated long-run sales growth rate continuing, with first-half 2026 sales up about 9.6% to $12.3 billion. First-half 2026 operating cash flow was low ($220 million versus $443 million) because receivables rose $1.05 billion; this is working capital timing, which we remove, but a reader should confirm it reverses. After year 10 we assume no further growth in any case, because we cannot name a specific driver beyond the existing business; we assume it persists for a finite number of years rather than forever, longest in the bull case. What would make this wrong: a sustained fall in gross margin (partly from vendors shifting to direct or cloud sales) would push the business toward the bear case; the reverse, stable margins with continued 5%+ sales growth, toward the bull case. We could not fully reconcile the large offsetting swings in 'other assets' and 'other liabilities' in the cash flow statements (about $390 million and $407 million in 2025); the filer attributes them to gross-versus-net revenue presentation, and they net to nearly zero, so the effect on our estimates is small. Some 2026 facts come from interim filings only; no earnings-call or guidance figures were used.