# Graco Inc. (GGG) — Financial Analysis

**Exchange:** NYSE  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-05-29  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/GGG/thesis · /stocks/GGG/memo

## Financial Snapshot

---
source: coverage-next-full
ticker: GGG
company: Graco Inc.
step: 04
title: Financial Quality & Adversarial Sweep
created: 2026-05-28
---

### Step 04 — Financial Quality & Adversarial Sweep: Graco Inc. (GGG)

#### 1. Earnings Quality Assessment

##### GAAP vs. Adjusted Earnings

Graco's adjusted EPS typically differs from GAAP by $0.02–0.05 per share, primarily from acquisition-related amortization and minor restructuring charges. [S1] The gap is immaterial relative to the overall earnings power — a positive signal of clean reporting.

| Metric | FY2023 | FY2024 | FY2025 |
|--------|--------|--------|--------|
| GAAP Diluted EPS | $3.08 | $3.06 | $3.08 |
| Adjusted Diluted EPS (Q4 only) | — | — | $0.77 (Q4) vs. GAAP $0.79 |
| Difference | ~$0.02–0.05 | ~$0.02–0.05 | Minimal |

##### FCF Conversion Quality

| Year | Net Income ($M) | FCF ($M) | Conversion |
|------|----------------|---------|-----------|
| FY2022 | $486 | $176 | 36% (anomaly — inventory build) |
| FY2023 | $522 | $466 | 89% |
| FY2024 | $521 | $515 | 99% |
| FY2025 | $522 | $638 | 122% |

FY2022's anomalous 36% FCF conversion reflects a strategic inventory build during the supply chain crisis — not an earnings quality problem. FY2023–2025 show excellent 89–122% conversion, confirming GAAP earnings are backed by real cash. [S2] FCF consistently exceeds net income over time, characteristic of high-quality compounders.

##### Accruals Analysis
- D&A is modest (~$107M vs. $46M capex in FY2025), meaning accumulated depreciation assets are not overstated
- Working capital cycle: FY2022 inventory spike ($339M cash, inventory build); FY2023–2025 normalization has released working capital
- Accounts receivable: Not flagged as growing relative to revenue — no channel stuffing indicators

##### Revenue Recognition
Standard point-in-time revenue recognition on product shipment; no complex contract revenue (no long-term construction contracts, no subscription revenue that could obscure trends). Clean recognition model. [S1]

---

#### 2. Balance Sheet Quality

| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|--------|--------|--------|--------|--------|--------|
| Cash ($M) | $624 | $339 | $538 | $675 | $624 |
| Total Debt ($M) | $217 | $117 | $42 | $41 | $43 |
| Net Cash / (Debt) ($M) | $407 | $222 | $496 | $634 | $581 |
| Current Ratio | est. 3.0x | est. 2.8x | est. 3.2x | est. 3.5x | 3.56x |
| Debt/EBITDA | 0.4x | 0.2x | 0.1x | 0.1x | 0.1x |

The balance sheet is essentially debt-free since FY2023 (long-term debt retired; $43M is likely short-term/operating leases). Net cash position of ~$580M provides ample capacity for opportunistic M&A or buybacks without leverage risk. [S2]

##### Off-Balance Sheet Items
- Operating leases: Not material (light manufacturing/office footprint)
- Pension: Graco historically had small defined benefit pension; materially funded
- Contingent liabilities: No material flagged items from 10-K reviews

---

#### 3. Capital Structure Analysis

- **Debt capacity:** At 2x EBITDA ($1.46B in additional debt capacity), Graco could fund a multi-billion dollar acquisition if needed
- **COROB financing:** €230M acquisition funded from operating cash + existing credit facility — no equity dilution
- **Debt maturity risk:** Minimal — no significant long-term debt maturities
- **Credit rating:** Investment grade (not publicly rated by Moody's/S&P in recent data, but balance sheet implies IG quality)

---

#### 4. Statement Adjustments for Analysis

For forward modeling, the following adjustments improve comparability:

| Item | Adjustment | Rationale |
|------|-----------|----------|
| Acquisition amortization | Add back | Non-cash; inflates COGS/SGA for accounting purposes |
| SBC | Include in cost | Real dilution cost; do not add back for equity value |
| One-time restructuring | Normalize | Minor; typically $5–15M per year |
| Working capital timing | Use 3-year average FCF | Smooths inventory/WC cycle effects |

**Adjusted normalized EBIT (FY2025):** ~$640M (adding back ~$15M amortization = ~28.6% adjusted margin)

---

#### 5. Adversarial Research Sweep

**Objective:** Identify short-seller campaigns, SEC/DOJ investigations, class action lawsuits, product liability exposure, restatements, or material governance failures.

##### Short Seller Reports
- No material short-seller campaigns found targeting GGG. [S3]
- Short interest is minimal at ~1–2% of float — institutional consensus is constructive.
- Seeking Alpha: Articles occasionally note "No margin of safety" at current valuation multiples — a valuation critique, not a fraud or quality concern. [S4]

##### Regulatory / Legal
- No SEC investigations or DOJ probes found. [S3]
- Product liability: Graco's products are used in industrial settings — some inherent product liability exposure, but no material disclosed legal judgments in recent filings.
- Environmental: Standard industrial manufacturing environmental compliance; no material Superfund or EPA exposure flagged.

##### Accounting / Restatement History
- No restatements in available filing history. [S1]
- Auditor: Deloitte & Touche LLP (long-tenured auditor; no opinion modifications)
- No material weaknesses in internal controls flagged.

##### Governance Red Flags
- Classified board structure (staggered elections) — mild negative from shareholder rights perspective, but standard for industrial companies
- Insider ownership ~1.5% — below ideal for founder-operator alignment but standard for legacy industrial company
- No related-party transaction concerns identified

##### Customer/Product Concentration Risks
- No disclosed customer >10% of revenue
- COROB adds paint retail giants (e.g., Sherwin-Williams, Dulux, Asian Paints) as significant customers — concentration risk, but these are investment-grade counterparties

---

#### 6. Red Flag Checklist

| Category | Status | Notes |
|----------|--------|-------|
| Short seller reports | CLEAR | No material short campaigns |
| SEC/DOJ investigations | CLEAR | None found |
| Accounting restatements | CLEAR | None in history |
| Material weakness (ICFR) | CLEAR | Auditor clean opinions |
| Unusual accruals build | CLEAR | FCF > net income in recent years |
| Revenue recognition concerns | CLEAR | Standard point-in-time; clean |
| Related party transactions | CLEAR | None identified |
| Aggressive M&A goodwill | MONITOR | COROB adds goodwill; track impairment |
| Aggressive pension assumptions | CLEAR | Minimal pension exposure |
| Litigation risk | LOW | Standard product liability; no material exposure |

**Overall financial quality: HIGH.** Graco is a textbook high-quality industrial compounder with clean accounting, conservative financial policies, and genuine cash earnings.

---

#### 7. Source Index

| ID | Source |
|----|--------|
| S1 | GGG 10-K annual reports; SEC EDGAR |
| S2 | StockAnalysis.com/stocks/ggg/financials/cash-flow-statement |
| S3 | Web search: Graco short interest, SEC investigations, lawsuits |
| S4 | Seeking Alpha: "Wide Moat, No Margin of Safety" — valuation opinion only |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/GGG/fundamental

## Navigation

- Overview: /stocks/GGG
- Financials (this page): /stocks/GGG/financials
- Thesis: /stocks/GGG/thesis
- Investment Memo: /stocks/GGG/memo
- Coverage universe: /stocks