NYSE:WSO

Stock Analysis Report

Executive Summary

Watsco, Inc., together with its subsidiaries, distributes air conditioning, heating, and refrigeration equipment; and related parts and supplies in the United States, Canada, Mexico, and Puerto Rico.

Rewards

Trading at 1.9% below its fair value

Earnings are forecast to grow 5.65% per year

Earnings grew by 0.6% over the past year

Risk Analysis

Dividend of 3.52% is not well covered by earnings



Snowflake Analysis

Flawless balance sheet with acceptable track record.


Similar Companies

Share Price & News

How has Watsco's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: WSO has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

2.1%

WSO

2.1%

US Trade Distributors

0.7%

US Market


1 Year Return

19.5%

WSO

22.4%

US Trade Distributors

18.2%

US Market

Return vs Industry: WSO underperformed the US Trade Distributors industry which returned 22.4% over the past year.

Return vs Market: WSO matched the US Market which returned 18.2% over the past year.


Shareholder returns

WSOIndustryMarket
7 Day2.1%2.1%0.7%
30 Day2.2%-1.2%1.5%
90 Day9.7%9.4%5.0%
1 Year24.6%19.5%24.7%22.4%20.8%18.2%
3 Year27.0%14.5%28.7%23.1%45.2%35.8%
5 Year105.7%76.2%45.9%35.3%71.6%52.7%

Price Volatility Vs. Market

How volatile is Watsco's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Watsco undervalued compared to its fair value and its price relative to the market?

1.9%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: WSO ($181.68) is trading below our estimate of fair value ($185.11)

Significantly Below Fair Value: WSO is trading below fair value, but not by a significant amount.


Price To Earnings Ratio

PE vs Industry: WSO is poor value based on its PE Ratio (27.5x) compared to the Trade Distributors industry average (17.2x).

PE vs Market: WSO is poor value based on its PE Ratio (27.5x) compared to the US market (18.5x).


Price to Earnings Growth Ratio

PEG Ratio: WSO is poor value based on its PEG Ratio (4.9x)


Price to Book Ratio

PB vs Industry: WSO is overvalued based on its PB Ratio (4.4x) compared to the US Trade Distributors industry average (1.7x).


Next Steps

Future Growth

How is Watsco forecast to perform in the next 1 to 3 years based on estimates from 10 analysts?

5.6%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: WSO's forecast earnings growth (5.6% per year) is above the savings rate (1.7%).

Earnings vs Market: WSO's earnings (5.6% per year) are forecast to grow slower than the US market (14.2% per year).

High Growth Earnings: WSO's earnings are forecast to grow, but not significantly.

Revenue vs Market: WSO's revenue (4% per year) is forecast to grow slower than the US market (7.4% per year).

High Growth Revenue: WSO's revenue (4% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: WSO's Return on Equity is forecast to be low in 3 years time (17.7%).


Next Steps

Past Performance

How has Watsco performed over the past 5 years?

10.8%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: WSO has high quality earnings.

Growing Profit Margin: WSO's current net profit margins (4.9%) are lower than last year (5%).


Past Earnings Growth Analysis

Earnings Trend: WSO's earnings have grown by 10.8% per year over the past 5 years.

Accelerating Growth: WSO's earnings growth over the past year (0.6%) is below its 5-year average (10.8% per year).

Earnings vs Industry: WSO earnings growth over the past year (0.6%) exceeded the Trade Distributors industry -8.5%.


Return on Equity

High ROE: WSO's Return on Equity (17.1%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Watsco's financial position?


Financial Position Analysis

Short Term Liabilities: WSO's short term assets ($1.7B) exceed its short term liabilities ($542.3M).

Long Term Liabilities: WSO's short term assets ($1.7B) exceed its long term liabilities ($397.7M).


Debt to Equity History and Analysis

Debt Level: WSO's debt to equity ratio (9.7%) is considered satisfactory.

Reducing Debt: WSO's debt to equity ratio has reduced from 30.9% to 9.7% over the past 5 years.

Debt Coverage: WSO's debt is well covered by operating cash flow (176%).

Interest Coverage: WSO's interest payments on its debt are well covered by EBIT (96.2x coverage).


Balance Sheet

Inventory Level: WSO has a high level of physical assets or inventory.

Debt Coverage by Assets: WSO's debt is covered by short term assets (assets are 10x debt).


Next Steps

Dividend

What is Watsco's current dividend yield, its reliability and sustainability?

3.52%

Current Dividend Yield


Dividend Yield vs Market

company3.5%marketbottom25%1.4%markettop25%3.7%industryaverage2.6%forecastin3Years3.7%

Current dividend yield vs market & industry

Notable Dividend: WSO's dividend (3.52%) is higher than the bottom 25% of dividend payers in the US market (1.43%).

High Dividend: WSO's dividend (3.52%) is low compared to the top 25% of dividend payers in the US market (3.7%).


Stability and Growth of Payments

Stable Dividend: WSO's dividend payments have been volatile in the past 10 years.

Growing Dividend: WSO's dividend payments have increased over the past 10 years.


Current Payout to Shareholders

Dividend Coverage: With its high payout ratio (94.7%), WSO's dividend payments are not well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: WSO's dividends in 3 years are forecast to be covered by earnings (89.8% payout ratio).


Next Steps

Management

What is the CEO of Watsco's salary, the management and board of directors tenure and is there insider trading?

5.8yrs

Average management tenure


CEO

Albert Nahmad (78yo)

47yrs

Tenure

US$7,117,698

Compensation

Mr. Albert H. Nahmad has been the Chief Executive Officer of Watsco Inc. since December 1972. Mr. Nahmad is a General Partner of Alna Capital Associates. Mr. Nahmad served as President of Watsco Inc. from  ...


CEO Compensation Analysis

Compensation vs Market: Albert's total compensation ($USD7.12M) is about average for companies of similar size in the US market ($USD6.70M).

Compensation vs Earnings: Albert's compensation has been consistent with company performance over the past year.


Management Age and Tenure

5.8yrs

Average Tenure

61yo

Average Age

Experienced Management: WSO's management team is seasoned and experienced (5.8 years average tenure).


Board Age and Tenure

2.9yrs

Average Tenure

71yo

Average Age

Experienced Board: WSO's board of directors are not considered experienced ( 2.9 years average tenure), which suggests a new board.


Insider Trading

Insider Buying: WSO insiders have only sold shares in the past 3 months.


Recent Insider Transactions

SellUS$17,81018 Nov 19
Bob Moss
EntityIndividual
Role
Vice Chairman
Co-Vice Chairman of the Board
Shares100
Max PriceUS$178.10
SellUS$96,17923 Oct 19
George Sape
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares550
Max PriceUS$174.87
SellUS$353,16621 Dec 18
Barry Logan
EntityIndividual
Role
Senior Key Executive
Executive VP of Planning & Strategy and Secretary
Shares2,500
Max PriceUS$141.27

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Albert Nahmad (78yo)

    Chairman & CEO

    • Tenure: 47yrs
    • Compensation: US$7.12m
  • Barry Logan (56yo)

    Executive VP of Planning & Strategy and Secretary

    • Tenure: 0.3yrs
    • Compensation: US$409.99k
  • Ana Menendez (54yo)

    CFO, Treasurer & Assistant Secretary

    • Tenure: 16.1yrs
    • Compensation: US$331.19k
  • Paul Johnston (66yo)

    Executive Vice President

    • Tenure: 5.8yrs
    • Compensation: US$872.05k
  • A. J. Nahmad (38yo)

    President & Director

    • Tenure: 8.1yrs
    • Compensation: US$3.88m
  • Rick Gomez

    Vice President of Corporate Development

    • Tenure: 0yrs
  • Stephen Rush (69yo)

    Executive VP & COO

    • Tenure: 0.7yrs
  • Steven Rupp

    Chief Technology Officer

    • Tenure: 8.3yrs

Board Members

  • Albert Nahmad (78yo)

    Chairman & CEO

    • Tenure: 47yrs
    • Compensation: US$7.12m
  • Cesar Alvarez (71yo)

    Co-Vice Chairman of the Board

    • Tenure: 0yrs
    • Compensation: US$84.80k
  • Bob Moss (71yo)

    Co-Vice Chairman of the Board

    • Tenure: 0yrs
    • Compensation: US$84.80k
  • George Sape (75yo)

    Independent Director

    • Tenure: 4.1yrs
    • Compensation: US$111.00k
  • Brian Keeley (74yo)

    Independent Director

    • Tenure: 1.8yrs
    • Compensation: US$106.00k
  • Denise Dickins (57yo)

    Lead Independent Director

    • Tenure: 0yrs
    • Compensation: US$182.20k
  • Slava Rubin (40yo)

    Independent Director

    • Tenure: 1.8yrs
    • Compensation: US$84.80k
  • A. J. Nahmad (38yo)

    President & Director

    • Tenure: 8.1yrs
    • Compensation: US$3.88m
  • J. Custer (56yo)

    Independent Director

    • Tenure: 0yrs
  • Rachel Wilson

    Member of Advisory Board

    • Tenure: 0.3yrs

Company Information

Watsco, Inc.'s company bio, employee growth, exchange listings and data sources


Key Information

  • Name: Watsco, Inc.
  • Ticker: WSO
  • Exchange: NYSE
  • Founded: 1945
  • Industry: Trading Companies and Distributors
  • Sector: Capital Goods
  • Market Cap: US$6.209b
  • Shares outstanding: 35.04m
  • Website: https://www.watsco.com

Number of Employees


Location

  • Watsco, Inc.
  • 2665 South Bayshore Drive
  • Suite 901
  • Miami
  • Florida
  • 33133
  • United States

Listings

TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
WSO.BNYSE (New York Stock Exchange)Class B Common StockUSUSDApr 1968
WSONYSE (New York Stock Exchange)YesCommon StockUSUSDJun 1984
WC3DB (Deutsche Boerse AG)YesCommon StockDEEURJun 1984

Biography

Watsco, Inc., together with its subsidiaries, distributes air conditioning, heating, and refrigeration equipment; and related parts and supplies in the United States, Canada, Mexico, and Puerto Rico. It of ...


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2019/12/08 23:45
End of Day Share Price2019/12/06 00:00
Earnings2019/09/30
Annual Earnings2018/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.