WATSCO INC (WSO) Stock Fundamental Analysis
NYSE:WSO - New York Stock Exchange, Inc. - US9426222009 - Common Stock - Currency: USD
We assign a fundamental rating of 6 out of 10 to WSO. WSO was compared to 48 industry peers in the Trading Companies & Distributors industry. While WSO has a great profitability rating, there are some minor concerns on its financial health. WSO is valied quite expensively at the moment, while it does show a decent growth rate.
1. Profitability
1.1 Basic Checks
WSO had positive earnings in the past year.
WSO had a positive operating cash flow in the past year.
Each year in the past 5 years WSO has been profitable.
WSO had a positive operating cash flow in each of the past 5 years.
1.2 Ratios
WSO has a Return On Assets of 11.02%. This is amongst the best in the industry. WSO outperforms 91.67% of its industry peers.
WSO has a better Return On Equity (18.42%) than 68.75% of its industry peers.
WSO has a Return On Invested Capital of 16.66%. This is amongst the best in the industry. WSO outperforms 91.67% of its industry peers.
WSO had an Average Return On Invested Capital over the past 3 years of 20.81%. This is significantly above the industry average of 9.18%.
The 3 year average ROIC (20.81%) for WSO is well above the current ROIC(16.66%). The reason for the recent decline needs to be investigated.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 11.02% | ||
| ROE | 18.42% | ||
| ROIC | 16.66% |
ROA(3y)13.43%
ROA(5y)12.52%
ROE(3y)23.42%
ROE(5y)21.95%
ROIC(3y)20.81%
ROIC(5y)19.72%
1.3 Margins
WSO's Profit Margin of 6.47% is fine compared to the rest of the industry. WSO outperforms 70.83% of its industry peers.
In the last couple of years the Profit Margin of WSO has grown nicely.
WSO's Operating Margin of 9.72% is fine compared to the rest of the industry. WSO outperforms 68.75% of its industry peers.
WSO's Operating Margin has improved in the last couple of years.
Looking at the Gross Margin, with a value of 26.95%, WSO is in line with its industry, outperforming 41.67% of the companies in the same industry.
WSO's Gross Margin has improved in the last couple of years.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 9.72% | ||
| PM (TTM) | 6.47% | ||
| GM | 26.95% |
OM growth 3Y0.55%
OM growth 5Y5.7%
PM growth 3Y2.52%
PM growth 5Y6.74%
GM growth 3Y0.36%
GM growth 5Y2.05%
2. Health
2.1 Basic Checks
The Return on Invested Capital (ROIC) is well above the Cost of Capital (WACC), so WSO is creating value.
The number of shares outstanding for WSO has been increased compared to 1 year ago.
Compared to 5 years ago, WSO has more shares outstanding
The debt/assets ratio for WSO has been reduced compared to a year ago.
2.2 Solvency
There is no outstanding debt for WSO. This means it has a Debt/Equity and Debt/FCF ratio of 0 and it is amongst the best of the sector and industry.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0 | ||
| Debt/FCF | 0.25 | ||
| Altman-Z | N/A |
ROIC/WACC1.66
WACC10.04%
2.3 Liquidity
WSO has a Current Ratio of 3.28. This indicates that WSO is financially healthy and has no problem in meeting its short term obligations.
Looking at the Current ratio, with a value of 3.28, WSO is in the better half of the industry, outperforming 79.17% of the companies in the same industry.
WSO has a Quick Ratio of 1.36. This is a normal value and indicates that WSO is financially healthy and should not expect problems in meeting its short term obligations.
WSO's Quick ratio of 1.36 is in line compared to the rest of the industry. WSO outperforms 54.17% of its industry peers.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 3.28 | ||
| Quick Ratio | 1.36 |
3. Growth
3.1 Past
The Earnings Per Share has been growing slightly by 0.08% over the past year.
WSO shows quite a strong growth in Earnings Per Share. Measured over the last years, the EPS has been growing by 15.67% yearly.
The Revenue has been growing slightly by 3.92% in the past year.
WSO shows quite a strong growth in Revenue. Measured over the last years, the Revenue has been growing by 9.81% yearly.
EPS 1Y (TTM)0.08%
EPS 3Y7.25%
EPS 5Y15.67%
EPS Q2Q%-11.06%
Revenue 1Y (TTM)3.92%
Revenue growth 3Y6.65%
Revenue growth 5Y9.81%
Sales Q2Q%-2.17%
3.2 Future
WSO is expected to show quite a strong growth in Earnings Per Share. In the coming years, the EPS will grow by 9.55% yearly.
The Revenue is expected to grow by 7.91% on average over the next years.
EPS Next Y9.56%
EPS Next 2Y9.16%
EPS Next 3Y10.16%
EPS Next 5Y9.55%
Revenue Next Year5.23%
Revenue Next 2Y5.26%
Revenue Next 3Y5.46%
Revenue Next 5Y7.91%
3.3 Evolution
When comparing the EPS growth rate of the last years to the growth rate of the upcoming years, we see that the growth is decreasing.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.
4. Valuation
4.1 Price/Earnings Ratio
The Price/Earnings ratio is 34.99, which means the current valuation is very expensive for WSO.
64.58% of the companies in the same industry are cheaper than WSO, based on the Price/Earnings ratio.
When comparing the Price/Earnings ratio of WSO to the average of the S&P500 Index (25.82), we can say WSO is valued slightly more expensively.
Based on the Price/Forward Earnings ratio of 28.83, the valuation of WSO can be described as expensive.
Compared to the rest of the industry, the Price/Forward Earnings ratio of WSO indicates a slightly more expensive valuation: WSO is more expensive than 68.75% of the companies listed in the same industry.
When comparing the Price/Forward Earnings ratio of WSO to the average of the S&P500 Index (21.76), we can say WSO is valued slightly more expensively.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 34.99 | ||
| Fwd PE | 28.83 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of WSO indicates a rather expensive valuation: WSO more expensive than 81.25% of the companies listed in the same industry.
The rest of the industry has a similar Price/Free Cash Flow ratio as WSO.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 40.05 | ||
| EV/EBITDA | 23.29 |
4.3 Compensation for Growth
The high PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates WSO does not grow enough to justify the current Price/Earnings ratio.
WSO has an outstanding profitability rating, which may justify a higher PE ratio.
PEG (NY)3.66
PEG (5Y)2.23
EPS Next 2Y9.16%
EPS Next 3Y10.16%
5. Dividend
5.1 Amount
WSO has a Yearly Dividend Yield of 2.50%.
Compared to an average industry Dividend Yield of 2.68, WSO pays a better dividend. On top of this WSO pays more dividend than 87.50% of the companies listed in the same industry.
WSO's Dividend Yield is comparable with the S&P500 average which is at 2.36.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.5% |
5.2 History
The dividend of WSO is nicely growing with an annual growth rate of 11.05%!
WSO has paid a dividend for at least 10 years, which is a reliable track record.
WSO has not decreased their dividend for at least 10 years, which is a reliable track record.
Dividend Growth(5Y)11.05%
Div Incr Years11
Div Non Decr Years11
5.3 Sustainability
WSO pays out 88.76% of its income as dividend. This is not a sustainable payout ratio.
WSO's earnings are growing slower than its dividend. This means the dividend growth is not sustainable.
DP88.76%
EPS Next 2Y9.16%
EPS Next 3Y10.16%
455.22
-0.86 (-0.19%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCapital Goods
GICS IndustryTrading Companies & Distributors
Earnings (Last)
Earnings (Next)
Inst Owners105.71%
Inst Owner Change1.88%
Ins Owners0.39%
Ins Owner Change0%
Market Cap18.43B
Analysts67.62
Price Target498.28 (9.46%)
Short Float %6.96%
Short Ratio7.62
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 2.5% |
Yearly Dividend9.55
Dividend Growth(5Y)11.05%
DP88.76%
Div Incr Years11
Div Non Decr Years11
Ex-Date
Surprises & Revisions
EPS beat(2)1
Avg EPS beat(2)-2.77%
Min EPS beat(2)-15.33%
Max EPS beat(2)9.8%
EPS beat(4)1
Avg EPS beat(4)-5.58%
Min EPS beat(4)-15.33%
Max EPS beat(4)9.8%
EPS beat(8)2
Avg EPS beat(8)-6.76%
EPS beat(12)4
Avg EPS beat(12)1.51%
EPS beat(16)8
Avg EPS beat(16)7.52%
Revenue beat(2)1
Avg Revenue beat(2)-2.02%
Min Revenue beat(2)-8.37%
Max Revenue beat(2)4.34%
Revenue beat(4)1
Avg Revenue beat(4)-2.92%
Min Revenue beat(4)-8.37%
Max Revenue beat(4)4.34%
Revenue beat(8)2
Avg Revenue beat(8)-3.1%
Revenue beat(12)2
Avg Revenue beat(12)-2.76%
Revenue beat(16)5
Avg Revenue beat(16)3.76%
PT rev (1m)-3.16%
PT rev (3m)0.83%
EPS NQ rev (1m)-1.26%
EPS NQ rev (3m)-3.26%
EPS NY rev (1m)-2.11%
EPS NY rev (3m)-3.08%
Revenue NQ rev (1m)-1.82%
Revenue NQ rev (3m)-2.29%
Revenue NY rev (1m)-1.95%
Revenue NY rev (3m)-1.06%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 34.99 | ||
| Fwd PE | 28.83 | ||
| P/S | 2.43 | ||
| P/FCF | 40.05 | ||
| P/OCF | 37.47 | ||
| P/B | 6.91 | ||
| P/tB | 10.14 | ||
| EV/EBITDA | 23.29 |
EPS(TTM)13.01
EY2.86%
EPS(NY)15.79
Fwd EY3.47%
FCF(TTM)11.37
FCFY2.5%
OCF(TTM)12.15
OCFY2.67%
SpS187.36
BVpS65.84
TBVpS44.88
PEG (NY)3.66
PEG (5Y)2.23
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 11.02% | ||
| ROE | 18.42% | ||
| ROCE | 20.89% | ||
| ROIC | 16.66% | ||
| ROICexc | 18.98% | ||
| ROICexgc | 26.14% | ||
| OM | 9.72% | ||
| PM (TTM) | 6.47% | ||
| GM | 26.95% | ||
| FCFM | 6.07% |
ROA(3y)13.43%
ROA(5y)12.52%
ROE(3y)23.42%
ROE(5y)21.95%
ROIC(3y)20.81%
ROIC(5y)19.72%
ROICexc(3y)23.47%
ROICexc(5y)21.78%
ROICexgc(3y)31.07%
ROICexgc(5y)29.54%
ROCE(3y)26.1%
ROCE(5y)24.73%
ROICexcg growth 3Y-0.91%
ROICexcg growth 5Y8.07%
ROICexc growth 3Y0.61%
ROICexc growth 5Y9.42%
OM growth 3Y0.55%
OM growth 5Y5.7%
PM growth 3Y2.52%
PM growth 5Y6.74%
GM growth 3Y0.36%
GM growth 5Y2.05%
F-Score7
Asset Turnover1.7
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0 | ||
| Debt/FCF | 0.25 | ||
| Debt/EBITDA | 0 | ||
| Cap/Depr | 75.96% | ||
| Cap/Sales | 0.42% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 63.13% | ||
| Profit Quality | 93.71% | ||
| Current Ratio | 3.28 | ||
| Quick Ratio | 1.36 | ||
| Altman-Z | N/A |
F-Score7
WACC10.04%
ROIC/WACC1.66
Cap/Depr(3y)95.78%
Cap/Depr(5y)88.24%
Cap/Sales(3y)0.46%
Cap/Sales(5y)0.42%
Profit Quality(3y)117.3%
Profit Quality(5y)129.41%
High Growth Momentum
Growth
EPS 1Y (TTM)0.08%
EPS 3Y7.25%
EPS 5Y15.67%
EPS Q2Q%-11.06%
EPS Next Y9.56%
EPS Next 2Y9.16%
EPS Next 3Y10.16%
EPS Next 5Y9.55%
Revenue 1Y (TTM)3.92%
Revenue growth 3Y6.65%
Revenue growth 5Y9.81%
Sales Q2Q%-2.17%
Revenue Next Year5.23%
Revenue Next 2Y5.26%
Revenue Next 3Y5.46%
Revenue Next 5Y7.91%
EBIT growth 1Y1.18%
EBIT growth 3Y7.24%
EBIT growth 5Y16.07%
EBIT Next Year16.28%
EBIT Next 3Y11.08%
EBIT Next 5Y9.61%
FCF growth 1Y-22.2%
FCF growth 3Y31.86%
FCF growth 5Y18.5%
OCF growth 1Y-21.47%
OCF growth 3Y30.29%
OCF growth 5Y18.15%