Watsco, Inc.
Watsco, Inc. Fundamental Analysis
Watsco, Inc. (WSO-B) shows weak financial fundamentals with a PE ratio of 28.72, profit margin of 6.87%, and ROE of 18.04%. The company generates $7.2B in annual revenue with weak year-over-year growth of -4.98%.
Key Strengths
Areas of Concern
The stock receives a Fundamental Health Score of 61.5/100 based on profitability, valuation, growth, and balance sheet metrics. The C+ grade reflects average fundamentals, with notable risks in certain areas.
Fundamental Health Score
We analyze WSO-B's fundamental strength across five key dimensions:
Efficiency Score
ExcellentWSO-B demonstrates superior asset utilization.
Valuation Score
ModerateWSO-B shows balanced valuation metrics.
Growth Score
WeakWSO-B faces weak or negative growth trends.
Financial Health Score
ExcellentWSO-B maintains a strong and stable balance sheet.
Profitability Score
ModerateWSO-B maintains healthy but balanced margins.
Key Financial Metrics
Is WSO-B Expensive or Cheap?
P/E Ratio
WSO-B trades at 28.72 times earnings. This indicates a fair valuation.
PEG Ratio
When adjusting for growth, WSO-B's PEG of -5.19 indicates potential undervaluation.
Price to Book
The market values Watsco, Inc. at 5.13 times its book value. This suggests the stock is fully valued or overvalued on an asset basis.
EV/EBITDA
Enterprise value stands at 19.85 times EBITDA. This signals the market has high growth expectations.
How Well Does WSO-B Make Money?
Net Profit Margin
For every $100 in sales, Watsco, Inc. keeps $6.87 as profit after all expenses.
Operating Margin
Core operations generate 9.87 in profit for every $100 in revenue, before interest and taxes.
ROE
Management delivers $18.04 in profit for every $100 of shareholder equity.
ROA
Watsco, Inc. generates $11.15 in profit for every $100 in assets, demonstrating efficient asset deployment.
Following the Money - Real Cash Generation
Operating Cash Flow
Watsco, Inc. generates limited operating cash flow of $569.79M, signaling weaker underlying cash strength.
Free Cash Flow
Watsco, Inc. produces free cash flow of $536.05M, offering steady but limited capital for shareholder returns and expansion.
FCF Per Share
Each share generates $14.13 in free cash annually.
FCF Yield
WSO-B converts 3.53% of its market value into free cash.
Financial Ratios Analysis
Valuation Ratios
P/E Ratio
Price to earnings ratio
28.72
vs 25 benchmark
PEG Ratio
Price/earnings to growth ratio
-5.19
vs 25 benchmark
P/B Ratio
Price to book value ratio
5.13
vs 25 benchmark
P/S Ratio
Price to sales ratio
2.11
vs 25 benchmark
Financial Health
Debt/Equity
Total debt to shareholders' equity
0.17
vs 25 benchmark
Current Ratio
Current assets to current liabilities
4.12
vs 25 benchmark
Efficiency Ratios
ROE
Return on equity percentage
0.18
vs 25 benchmark
ROA
Return on assets percentage
0.11
vs 25 benchmark
ROCE
Return on capital employed
0.19
vs 25 benchmark
How WSO-B Stacks Against Its Sector Peers
| Metric | WSO-B Value | Sector Average | Performance |
|---|---|---|---|
| P/E Ratio | 28.72 | 24.98 | Worse (Expensive) |
| ROE | 18.04% | 1284.00% | Weak |
| Net Margin | 6.87% | -45683.00% (disorted) | Weak |
| Debt/Equity | 0.17 | 0.79 | Strong (Low Leverage) |
| Current Ratio | 4.12 | 10.67 | Strong Liquidity |
| ROA | 11.15% | -1542352.00% (disorted) | Strong |
WSO-B outperforms its industry in 3 out of 6 key metrics, particularly excelling in ROA, but lagging in P/E Ratio.
Historical Growth Performance
5-Year Growth Trajectory
This section reviews Watsco, Inc.'s 5-year compound annual growth rate (CAGR) and compares its performance against the typical investment style of its industry.
Revenue CAGR
32.52%
Industry Style: Cyclical, Value, Infrastructure
High GrowthEPS CAGR
70.59%
Industry Style: Cyclical, Value, Infrastructure
High GrowthFCF CAGR
-1.37%
Industry Style: Cyclical, Value, Infrastructure
Declining