Financial Adviser: 5 Things to Know About William Belo’s Wilcon Depot, Inc. After 1Q 2026 and How to Profit from It

In periods of economic optimism, investors often focus on growth stories and expansion plans. But when uncertainty rises, markets tend to shift their attention toward resilience, balance sheet strength, and the ability of companies to withstand weaker economic conditions. 

The market environment today remains uncertain. Elevated global interest rates, lingering inflation pressures, geopolitical tensions in the Middle East, and concerns about slower global growth continue to weigh on investor sentiment.  

Higher borrowing costs have also started to affect property activity, housing demand, and consumer spending, including in the Philippines. 

The Philippine stock market has reflected these concerns. The PSEi has remained volatile in recent months, while property-related and consumer-linked stocks have come under pressure as investors worry about softer demand and the impact of higher interest rates on the economy. 

Yet periods of pessimism often create opportunities for long-term investors. 

Historically, some of the best long-term opportunities have emerged during periods when market sentiment becomes excessively negative and valuations fall faster than business fundamentals. 

In the PSE, one company that has attracted investor interest during the recent market weakness is Wilcon Depot, Inc (PSE: WLCON), the country’s largest listed home improvement and construction supply retailer. 

The stock has declined sharply from its all-time high near P40 per share to around P5.93 today (May 19), representing a decline of more than 80 percent from its peak valuation. The drop reflects market wide weakness in property-related sentiment, concerns about slower construction activity, softer margins, and slower growth expectations.  

For some investors, however, the magnitude of the decline raises an important question: has the market become overly pessimistic on the company’s long-term prospects? 

That question matters because stock prices and business fundamentals do not always move together. In the short run, markets are often driven by sentiment and fear.  

Over the long run, however, a company’s value is ultimately shaped by the strength of its operations, financial position, and ability to generate sustainable earnings through different economic cycles. 

With that in mind, let’s take a closer look at the fundamentals of WLCON and examine whether the stock may represent a potential long-term opportunity despite the recent market weakness.  

Here are some key things investors may want to understand about Wilcon following its latest first-quarter financial results: 

One of the biggest concerns surrounding WLCON in recent years has been the slowdown in earnings growth following the post-pandemic normalization in the property and consumer sectors.  

Higher interest rates and weaker consumer spending weighed on the company’s performance and contributed to the sharp decline in the stock price from its peak levels. 

WLCON’s 2025 net sales still grew by 3.7 percent to P35.4 billion, supported mainly by contributions from newly opened stores. However, same-store sales growth slightly declined by 0.3 percent, indicating softer demand across existing branches.  

Its net income for 2025, on the other hand, declined by 3.3 percent to P2.45 billion, while EBIT declined by 3.5 percent to P3.22 billion as operating expenses continued to rise. Gross profit margins also weakened from 39.1 percent to 38.6 percent due to softer product mix and lower contribution from higher-margin exclusive brands.  

On the surface, these figures appear disappointing. However, the more important question for investors may be whether 2025 represented a cyclical slowdown rather than a permanent deterioration in the business. 

WLCON’s first quarter 2026 results showed early signs of stabilization. For the first quarter of 2026, net sales grew by 9.1 percent year-on-year to P9.17 billion, a noticeable improvement from its 3.7 percent growth recorded for full-year 2025. More importantly, same-store sales growth turned positive again at 4.7 percent after the slight decline seen in 2025.  

This improvement matters because same-store sales are often one of the clearest indicators of underlying retail demand. Growth driven purely by new store openings can sometimes mask weakness in existing branches. In WLCON’s case, however, the return of positive same-store sales growth suggests that demand conditions across the existing network may already be improving. 

The higher revenue growth for first quarter translated into higher profitability. WLCON’s net income for the first quarter increased by 4.9 percent to P563 million despite continued margin pressure and higher operating expenses from expansion.  

At the same time, the company continued expanding its store network, opening three new depot-format stores during the quarter and bringing total store count to 107 nationwide.  

The latest financial results may suggest that WLCON’s earnings may be undergoing a temporary slowdown tied to the broader property and economic cycle. If same-store sales growth continues improving while new stores mature over the next few years, the company’s earnings trajectory could eventually recover faster than current market expectations imply. 

Another important area to examine when evaluating WLCON is its financial position. Despite the sharp fall in its share price and the slowdown in earnings growth, the company has not entered the cycle with a weak balance sheet.  

In fact, its latest financials show a retailer that still has liquidity, no traditional bank debt, and enough financial flexibility to continue expanding even during a softer property and consumer environment. 

During economic slowdowns, balance sheet strength often becomes one of the most important factors investors should monitor. Companies with excessive leverage can face pressure from rising interest costs and tighter liquidity. In contrast, businesses with strong balance sheets are often in a better position to survive difficult cycles and continue investing while competitors pull back. 

As of the first quarter of 2026, WLCON held approximately P3.16 billion in cash and short-term investments.  The company also continues to operate without traditional bank debt, which is relatively uncommon for a large-scale retailer with nationwide expansion plans. 

At first glance, WLCON’s liabilities may appear elevated, with total liabilities reaching P17.1 billion as of March 2026.  However, a closer look at the notes to the financial statements shows that the bulk of these liabilities consist primarily of lease obligations recognized under PFRS 16 rather than bank borrowings.  

This distinction matters because lease liabilities are fundamentally different from traditional financial debt. Instead of borrowing heavily from banks to acquire land and buildings, WLCON primarily leases store locations from related parties and third parties. As a result, the company avoids the refinancing risks and interest burden that highly leveraged retailers often face during periods of economic stress. 

Another important sign of financial flexibility is that WLCON continues to expand despite the weaker economic environment. During the first quarter alone, WLCON’s total capital expenditures during the quarter totaled P417 million.  

WLCON’s current ratio also remained healthy at 2.44 times, indicating that current assets remain comfortably above short-term liabilities.  In addition, management stated that the company continues to maintain easy access to debt markets despite remaining effectively bank debt-free.  

Beyond liquidity and leverage, we can also evaluate whether a company is generating attractive returns relative to the capital employed in the business. 

Using WLCON’s 2025 net income of about P2.45 billion and equity base of roughly P24.8 billion, the company’s ROE is estimated at around 10 percent. While this is lower than the elevated returns generated during the property boom years, it remains relatively respectable considering the current weak property and retail environment. 

Another profitability metric investors often monitor is return on invested capital, or ROIC, which attempts to measure how efficiently the entire business generates operating profits relative to all capital invested into operations. 

Using WLCON’s 2025 adjusted EBIT of P3.215 billion and applying a 25 percent corporate tax rate, the company’s after-tax operating profit, or NOPAT, is about P2.41 billion. With an equity base of P24.81 billion and lease liabilities of about P9.80 billion, less P2.57 billion in cash and short-term investments, WLCON’s invested capital is about P32.04 billion. Using these figures, WLCON’s ROIC is computed at about 7.5 percent. 

This suggests that despite weaker margins and slower sales growth, the company still continues to generate positive returns on the capital invested into the business. 

ALSO READ

Financial Adviser: 5 Business Lessons Everyone Can Learn from the Founders of Arce Dairy

Financial Adviser: 5 Business Lessons Everyone Can Learn from Anthony Elepano, Founder and CEO of Chef Tony’s Popcorn

Financial Adviser: 5 Business Lessons Everyone Can Learn from Gerry Apolinario, Founder and CEO of Gerry’s Grill

During periods of economic weakness, some companies may continue reporting accounting profits even as cash flows deteriorate due to aggressive receivable growth or rising leverage. In retail businesses, this becomes particularly important because expansion often requires substantial working capital and inventory investments. 

In WLCON’s case, however, its recent financial results suggest that the company continues to generate relatively healthy operating cash flows despite the slowdown in earnings growth. 

A common measure used by investors is the operating cash flow-to-net income ratio. In general, a ratio consistently near or above 1.0x may indicate that earnings are supported by actual cash generation rather than purely accounting entries. 

For the first quarter of 2026, WLCON reported net income of approximately P563 million while net cash provided by operating activities reached approximately P1.59 billion. This translates to an operating cash flow-to-net income ratio of approximately 2.8 times. 

This is important because it suggests the business generated substantially more cash than reported accounting earnings during the quarter.  

A closer examination of WLCON’s cash flow statement helps explain why. During the first quarter of 2025, merchandise inventories increased by approximately P1.39 billion, which absorbed a large amount of working capital. By contrast, during the first quarter of 2026, inventories actually declined by approximately P91 million despite continued store expansion. 

This swing alone represented an improvement of roughly P1.48 billion in inventory-related cash flow year-on-year. 

At the same time, capital expenditures declined from approximately P649 million in the first quarter of 2025 to about P396 million in the first quarter of 2026 even as the company continued opening new stores and warehouses. 

Trade receivables also remained relatively manageable at only around P374 million despite annual sales exceeding P35 billion, reflecting the largely cash-and-carry nature of the company’s retail model. 

WLCON’s consignment structure may also help support cash flow efficiency. About 21.5 percent of total sales come from consignment arrangements, which allow suppliers to absorb part of the inventory carrying burden and help reduce working capital pressure on the company itself. 

While earnings growth slowed during the weaker property cycle, WLCON’s underlying cash generation capability remains stronger than what the current share price may imply. 

In many cases, companies that consistently convert accounting earnings into strong operating cash flows tend to deserve higher valuation multiples because cash-based earnings are often viewed as more sustainable and lower quality-risk from an investor perspective.  

WLCON today is no longer being valued by the market as the high-growth retailer it was once perceived to be. 

During the property boom years, the market largely valued WLCON as a high-growth modern retail story. Investors were willing to assign premium valuation multiples based on expectations of aggressive nationwide expansion.  

Today, however, the market appears to value the company much more conservatively. 

At around P5.93 per share, WLCON now trades at roughly 9.6 times trailing earnings. This represents a major compression from previous years. During 2024, WLCON’s average PE ratio was around 23 times earnings as investors still priced the company as a premium growth retailer. 

The decline in multiples reflects the weaker property cycle and softer margins. From a cyclical perspective, such a derating is understandable. 

However, the magnitude of the decline may also show how pessimistic the market has become toward the stock. 

WLCON’s share price has now fallen close to its IPO price of approximately P5.05 per share in 2017 despite the company having expanded significantly over the past several years. 

 
At the time of its IPO, the company operated a far smaller store network and generated substantially lower revenues and earnings compared with today. Since then, WLCON has expanded to 107 stores nationwide while annual sales have grown to more than P35 billion and net income continues to remain above P2 billion annually. 

The valuation discount also becomes visible when compared against book value. 

As of the first quarter of 2026, WLCON reported total equity of approximately P23.73 billion. With approximately 4.10 billion outstanding shares, book value per share is roughly P5.79. At a market price of around P5.93, the stock trades only slightly above book value.  

This is notable because companies with recognizable brands, nationwide scale, and returns on equity of over 10 percent would normally trade materially above book value under more stable market conditions. 

One simple way to gauge market expectations toward WLCON is by estimating how much premium investors are currently willing to pay for the company’s earnings. 

Using the current Philippine ten-year government bond yield of approximately 7.37 percent as the risk-free rate and WLCON’s beta of around 0.45, together with a 5 percent Philippine equity risk premium, WLCON’s estimated cost of equity is about 9.6 percent. 

By dividing WLCON’s trailing earnings per share of about P0.60 by its estimated cost of equity of 9.6 percent, we can derive a simplified no-growth intrinsic value of approximately P6.25 per share. 

Compared with the current share price of around P5.93, the market is effectively valuing WLCON at approximately a 5 percent discount to its no-growth intrinsic value. 

This may suggest that the market is currently undervaluing WLCON by pricing the company below its intrinsic value despite the business continuing to expand stores and generate positive same-store sales growth.  

Rather than pricing in future growth, the current valuation appears to reflect a highly pessimistic view toward the company’s long-term prospects and the property cycle. 

At the very least, a company that continues produce strong operating cash flow and maintain virtually no traditional bank debt should deserve at least a modest 20 percent growth premium above its current valuation. 

At a modest 20 percent growth premium to WLCON’s intrinsic value, a target value would imply a pricing closer to around P7.50 per share. 

From a Wave perspective, WLCON appears to be in the later stages of a prolonged five-wave corrective decline that started after its 2021 peak near the P34 level. The stock has already undergone multiple impulsive downward legs followed by weaker and weaker corrective rebounds, which is characteristic of a mature bearish structure.  

The recent price action around the P5.80 area suggests that the market may already be forming the terminal portion of wave 5, particularly as downside momentum has slowed materially compared with the aggressive selling seen earlier in the decline.  

The repeated stabilization attempts and inability of bears to push the stock substantially below recent lows may indicate that selling exhaustion is gradually emerging. While this does not yet confirm the beginning of a new long-term bull cycle, it does increase the probability that WLCON is entering a bottoming process.  

From a price geometry perspective, the P5.80 region appears to be an important geometric support zone where price repeatedly finds equilibrium. The chart shows that each breakdown attempt near this level has so far struggled to gain downside follow-through which implies that the market is recognizing this area as a significant price support angle.  

In price geometry analysis, prolonged declines that begin compressing near key support zones often precede either a sharp reversal. At present, WLCON appears closer to this, especially as volatility has narrowed and the stock has started trading in a tighter range after a multi-year decline.  

However, the stock still needs to reclaim higher resistance levels, particularly around P6.50, before a larger structural reversal can be confirmed. Until then, the prevailing interpretation remains that WLCON is attempting to establish a base rather than beginning a full-fledged long-term uptrend. 

Given that P6.50 area now serves as the first major resistance zone to monitor, a decisive breakout above this level, especially if accompanied by stronger volume and sustained closes above P6.70, could open the path toward the P8.00 range.   

Such a move would also strengthen the argument that the stock has already completed a major Wave decline and is beginning a larger recovery phase.  

On the other hand, failure to hold the P5.80 support zone would weaken the developing bottoming structure and increase the risk of another capitulation leg lower. In that scenario, the next downside support areas could emerge around P5.30 and potentially near the psychological P5.00 level, where longer-term value buyers may attempt to re-enter the stock.  

Henry Ong, RFP, is an entrepreneur, financial planning advocate and business advisor. Email Henry for business advice [email protected] or follow him on Twitter @henryong888