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Why WATSCO INC (NYSE:WSO) qualifies as a quality stock.

By Mill Chart

Last update: Apr 30, 2024

In this article we will dive into WATSCO INC (NYSE:WSO) as a possible candidate for quality investing. Investors should always do their own research, but we noticed WATSCO INC showing up in our Caviar Cruise quality screen, which makes it worth to investigate a bit more.

A Deep Dive into WATSCO INC's Quality Metrics.

  • WATSCO INC has demonstrated significant revenue growth over the past 5 years, with a 9.88% increase. This underscores the company's ability to adapt to market dynamics and capitalize on growth opportunities.
  • The ROIC excluding cash and goodwill of WATSCO INC stands at 29.85%, reflecting the company's strong financial management and profitability. This metric underscores its ability to generate favorable returns on the capital invested in its core operations.
  • The Debt/Free Cash Flow Ratio of WATSCO INC stands at 0.15, reflecting the company's prudent capital structure and cash flow dynamics. This ratio highlights the company's ability to generate robust free cash flow relative to its debt obligations.
  • WATSCO INC demonstrates consistent Profit Quality over the past 5 years, with a strong 128.0%. This indicates the company's ability to generate sustainable and reliable profits, showcasing its long-term profitability and financial stability.
  • WATSCO INC has demonstrated consistent growth in EBIT over the past 5 years, with a strong 16.2%. This signifies the company's ability to generate sustainable earnings and reflects its positive financial trajectory.
  • WATSCO INC has achieved superior EBIT 5-year growth compared to its Revenue 5-year growth. This demonstrates the company's ability to maximize its profitability through effective cost management and operational strategies.

Zooming in on the fundamentals.

ChartMill assigns a Fundamental Rating to every stock. This score, ranging from 0 to 10, is updated daily and is determined by evaluating multiple fundamental indicators and properties.

We assign a fundamental rating of 5 out of 10 to WSO. WSO was compared to 52 industry peers in the Trading Companies & Distributors industry. While WSO belongs to the best of the industry regarding profitability, there are some minor concerns on its financial health. WSO does not seem to be growing, but still is valued expensively.

For an up to date full fundamental analysis you can check the fundamental report of WSO

More quality stocks can be found in our Caviar Cruise screen.

Keep in mind

This is not investing advice! The article highlights some of the observations at the time of writing, but you should always make your own analysis and invest based on your own insights.