Is Watsco, Inc. (NYSE:WSO) Potentially Undervalued?

Today we're going to take a look at the well-established Watsco, Inc. (NYSE:WSO). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$445 and falling to the lows of US$378. 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$397 reflective of the actual value of the large-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 our valuation model, Watsco seems to be fairly priced at around 0.4% below our intrinsic value, which means if you buy Watsco today, you’d be paying a fair price for it. And if you believe the company’s true value is $398.53, 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.

What kind of growth will Watsco generate?

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. Watsco's earnings over the next few years are expected to increase by 35%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? WSO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on WSO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Diving deeper into the forecasts for Watsco mentioned earlier will help you understand how analysts view the stock going forward. At Simply Wall St, we have the analysts estimates which you can view by clicking here.

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.