Is Now The Time To Look At Buying Watsco, Inc. (NYSE:WSO)?

While Watsco, Inc. (NYSE:WSO) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$283 at one point, and dropping to the lows of US$239. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Watsco's current trading price of US$249 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Watsco’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Watsco

Is Watsco Still Cheap?

According to my valuation model, Watsco seems to be fairly priced at around 7.4% below my intrinsic value, which means if you buy Watsco today, you’d be paying a fair price for it. And if you believe that the stock is really worth $269.45, then there’s not much of an upside to gain from mispricing. Furthermore, Watsco’s low beta implies that the stock is less volatile than the wider market.

Can we expect growth from Watsco?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Watsco, it is expected to deliver a negative earnings growth of -6.5%, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, WSO appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on WSO for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The stock appears to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystalize your views on WSO should the price fluctuate below its true value.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. Every company has risks, and we've spotted 2 warning signs for Watsco (of which 1 is a bit concerning!) you should know about.

If you are no longer interested in Watsco, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.