Watsco (NYSE:WSO) - Share price, News & Analysis

WSO fundamental analysis
Snowflake Score
Valuation	2/6
Future Growth	1/6
Past Performance	5/6
Financial Health	6/6
Dividends	3/6

WSO Stock Overview

Watsco, Inc., together with its subsidiaries, distributes air conditioning, heating, refrigeration equipment, and related parts and supplies.

Rewards

Trading at 25.4% below our estimate of its fair value

Earnings have grown 15.7% per year over the past 5 years

Risk Analysis

Earnings are forecast to decline by an average of 0.9% per year for the next 3 years

Dividend of 3.57% is not well covered by earnings

Watsco Competitors

Fastenal

NasdaqGS:FAST

US$29.6b

United Rentals

NYSE:URI

US$19.3b

Beacon Roofing Supply

NasdaqGS:BECN

US$4.1b

Triton International

NYSE:TRTN

US$3.9b

Price History & Performance

Summary of all time highs, changes and price drops for Watsco
Historical stock prices
Current Share Price	US$246.68
52 Week High	US$318.98
52 Week Low	US$239.62
Beta	0.87
1 Month Change	-13.92%
3 Month Change	-4.83%
1 Year Change	-13.14%
3 Year Change	57.42%
5 Year Change	75.44%
Change since IPO	9,350.51%

Recent News & Updates

May 17

Here's Why We Think Watsco (NYSE:WSO) Is Well Worth Watching

Like a puppy chasing its tail, some new investors often chase 'the next big thing', even if that means buying 'story...

May 04

Calculating The Fair Value Of Watsco, Inc. (NYSE:WSO)

Today we will run through one way of estimating the intrinsic value of Watsco, Inc. ( NYSE:WSO ) by projecting its...

Shareholder Returns

	WSO	US Trade Distributors	US Market
7D	-4.4%	-2.5%	-2.7%
1Y	-13.1%	-5.6%	-12.9%

Return vs Industry: WSO underperformed the US Trade Distributors industry which returned -4.8% over the past year.

Return vs Market: WSO matched the US Market which returned -12.7% over the past year.

Price Volatility

Is WSO's price volatile compared to industry and market?
WSO volatility
WSO Average Weekly Movement	4.6%
Trade Distributors Industry Average Movement	7.4%
Market Average Movement	7.9%
10% most volatile stocks in US Market	16.9%
10% least volatile stocks in US Market	3.0%

Stable Share Price: WSO is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 5% a week.

Volatility Over Time: WSO's weekly volatility (5%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1945	6,875	Albert Nahmad	https://www.watsco.com

Watsco, Inc., together with its subsidiaries, distributes air conditioning, heating, refrigeration equipment, and related parts and supplies. The company distributes equipment comprising residential ducted and ductless air conditioners, such as gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also offers parts, including replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation materials, refrigerants, ductworks, grills, registers, sheet metals, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies, as well as plumbing and bathroom remodeling supplies.

Watsco Fundamentals Summary

How do Watsco's earnings and revenue compare to its market cap?
WSO fundamental statistics
Market Cap	US$8.87b
Earnings (TTM)	US$435.62m
Revenue (TTM)	US$6.67b

20.1x

P/E Ratio

1.3x

P/S Ratio

Is WSO overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
WSO income statement (TTM)
Revenue	US$6.67b
Cost of Revenue	US$4.84b
Gross Profit	US$1.82b
Other Expenses	US$1.39b
Earnings	US$435.62m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	12.27
Gross Margin	27.34%
Net Profit Margin	6.53%
Debt/Equity Ratio	12.6%

How did WSO perform over the long term?

See historical performance and comparison

Dividends

3.6%

Current Dividend Yield

63%

Payout Ratio

Valuation

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

Valuation Score

2/6

Valuation Score 2/6

Below Fair Value
Significantly Below Fair Value
PE vs Industry
PE vs Market
PEG Ratio
PB vs Industry

25.4%

Undervalued compared to fair value

Share Price vs. Fair Value

Below Fair Value: WSO ($246.68) is trading below our estimate of fair value ($330.66)

Significantly Below Fair Value: WSO is trading below fair value by more than 20%.

Price To Earnings Ratio

PE vs Industry: WSO is poor value based on its PE Ratio (20.1x) compared to the US Trade Distributors industry average (12.8x).

PE vs Market: WSO is poor value based on its PE Ratio (20.1x) compared to the US market (15.5x).

Price to Earnings Growth Ratio

PEG Ratio: WSO's earnings are forecast to decline next year, so we can't calculate its PEG ratio.

Price to Book Ratio

PB vs Industry: WSO is overvalued based on its PB Ratio (5.1x) compared to the US Trade Distributors industry average (2.2x).

Future Growth

How is Watsco forecast to perform in the next 1 to 3 years based on estimates from 11 analysts?

Future Growth Score

1/6

Future Growth Score 1/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

-0.9%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: WSO's earnings are forecast to decline over the next 3 years (-0.9% per year).

Earnings vs Market: WSO's earnings are forecast to decline over the next 3 years (-0.9% per year).

High Growth Earnings: WSO's earnings are forecast to decline over the next 3 years.

Revenue vs Market: WSO's revenue (2.9% per year) is forecast to grow slower than the US market (7.8% per year).

High Growth Revenue: WSO's revenue (2.9% 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 high in 3 years time (20.7%)

Past Performance

How has Watsco performed over the past 5 years?

Past Performance Score

5/6

Past Performance Score 5/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

15.7%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: WSO has high quality earnings.

Growing Profit Margin: WSO's current net profit margins (6.5%) are higher than last year (5.2%).

Past Earnings Growth Analysis

Earnings Trend: WSO's earnings have grown by 15.7% per year over the past 5 years.

Accelerating Growth: WSO's earnings growth over the past year (62.2%) exceeds its 5-year average (15.7% per year).

Earnings vs Industry: WSO earnings growth over the past year (62.2%) underperformed the Trade Distributors industry 80.4%.

Return on Equity

High ROE: WSO's Return on Equity (27.3%) is considered high.

Financial Health

How is Watsco's financial position?

Financial Health Score

6/6

Financial Health Score 6/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: WSO's short term assets ($2.3B) exceed its short term liabilities ($836.8M).

Long Term Liabilities: WSO's short term assets ($2.3B) exceed its long term liabilities ($556.3M).

Debt to Equity History and Analysis

Debt Level: WSO's net debt to equity ratio (7.3%) is considered satisfactory.

Reducing Debt: WSO's debt to equity ratio has reduced from 23.4% to 12.6% over the past 5 years.

Debt Coverage: WSO's debt is well covered by operating cash flow (108.8%).

Interest Coverage: WSO's interest payments on its debt are well covered by EBIT (477.2x coverage).

Balance Sheet

Dividend

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

Dividend Score

4/6

Dividend Score 4/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

3.57%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: WSO's dividend (3.57%) is higher than the bottom 25% of dividend payers in the US market (1.57%).

High Dividend: WSO's dividend (3.57%) is low compared to the top 25% of dividend payers in the US market (4.09%).

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.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (63.2%), WSO's dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its high cash payout ratio (121.7%), WSO's dividend payments are not well covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

17.5yrs

Average management tenure

CEO

Albert Nahmad (80 yo)

49.42yrs

Tenure

US$10,672,518

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. fro...

CEO Compensation Analysis

Compensation vs Market: Albert's total compensation ($USD10.67M) is about average for companies of similar size in the US market ($USD8.23M).

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

Leadership Team

Experienced Management: WSO's management team is seasoned and experienced (17.5 years average tenure).

Board Members

Experienced Board: WSO's board of directors are considered experienced (3.8 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: Insufficient data to determine if insiders have bought more shares than they have sold in the past 3 months.

Ownership Breakdown

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

Data	Last Updated (UTC time)
Company Analysis	2022/05/21 00:00
End of Day Share Price	2022/05/20 00:00
Earnings	2022/03/31
Annual Earnings	2021/12/31