Watsco, Inc.
$368.36
+1.2%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. The company serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. As of December 31, 2021, it operated from 671 locations in the United States, Canada, Mexico, and Puerto Rico, as well as exports its products to Latin America and the Caribbean Basin. Watsco, Inc. was founded in 1945 and is headquartered in Miami, Florida.
At a Glance
Live SnapshotIntrinsic Alpha Methodology
Thesis Lenses
Signal
High confidenceValuation multiple is elevated (P/E 30.1).
Valuation inputs: P/E 30.1, earnings yield +3.3%, momentum +1.2%.
If multiples stay elevated while momentum fades, downside repricing risk rises.
Driver
High confidenceReturn profile is strong (ROE +17.9%, ROIC +14.3%).
Profitability stack: net margin +6.9%, ROE +17.9%, ROIC +14.3%.
Quality deterioration often appears in margins before it shows up in headline EPS.
Risk
High confidenceRisk profile is balanced but has notable pressure points to monitor.
Risk factors: liabilities/assets +27.7%, momentum +1.2%, net margin +6.9%.
Higher leverage with weak momentum and thin margins can amplify drawdown severity.
Watsco, Inc. Market vs Earnings Trajectory
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Watsco, Inc. Fair Value Envelope
Watsco, Inc. Profit Bridge
Profitability Analysis
Gross Margin
Moderate margins typical of competitive industries. Monitor for pricing pressure or rising costs.
Operating Margin
Acceptable margins but limited operational leverage. Operating expense control is important.
Net Profit Margin
Moderate profitability with room for improvement. Monitor interest expenses and tax efficiency.
Effective Tax Rate
Moderate tax rate typical for most corporations. Represents standard tax burden on profits.
Profitability Insight
Room for improvement: Moderate profitability with opportunities to enhance margins through better cost management or pricing strategy.
Watsco, Inc. Cash Conversion Engine
Cash Flow Quality Analysis
FCF Conversion Rate
Excellent cash generation. The company converts earnings to cash at or above 100%, indicating high-quality earnings.
CapEx Intensity
Asset-light business model. Low capital requirements leave more cash available for shareholders and growth investments.
FCF Growth Trend
Significant FCF decline raises concerns. Urgent review needed of operational performance and capital allocation.
Working Capital Impact
Minimal working capital impact on FCF. Changes in operating assets and liabilities well-managed.
Cash Flow Quality Insight
Asset-light with strong cash conversion: Low capital requirements combined with efficient cash generation creates significant shareholder value through dividends, buybacks, or strategic investments.
Watsco, Inc. Funding & Solvency Profile
Financial Health Analysis
Current Ratio
Excellent liquidity position. The company can easily cover its short-term obligations with substantial cushion.
Debt-to-Equity Ratio
Conservative capital structure. The company relies primarily on equity financing, indicating low financial risk.
Working Capital
Strong working capital position provides significant operational flexibility and financial cushion.
Asset Composition
Asset-light business model with high liquidity. Majority of assets are easily convertible to cash.
Financial Health Insight
Strong financial foundation: Excellent liquidity combined with conservative leverage suggests the company is well-positioned to weather economic uncertainties and fund growth opportunities.
Watsco, Inc. Street Expectations Map
Wall Street analysts project that WSO stock may experience modest gains over the coming 12 months. The consensus 1-year price target stands at 399.80, with estimates ranging from a low of 349.00 to a high of 485.00.
The consensus 1-year price target stands at 399.80, with estimates ranging from a low of 349.00 to a high of 485.00.
Analyst Consensus Analysis
Upside Potential
Moderate upside. Analysts expect positive returns but with limited margin of safety. Consider entry timing.
Analyst Agreement
Good consensus alignment. Moderate target spread reflects general agreement on value drivers with some variance in assumptions.
Risk-Reward Profile
Favorable risk-reward. Potential upside significantly exceeds downside risk, offering asymmetric return profile attractive for risk-tolerant investors.
Analyst Conviction
Positive outlook with reasonable agreement. Analysts generally optimistic about prospects with manageable uncertainty.
Market Sentiment Insight
Monitor and evaluate: Current analyst consensus suggests limited conviction or near-term catalysts. Stay informed on company developments and reassess positioning as new information emerges.
Watsco, Inc. Insider Positioning
During the last 12 months, insiders have sold $986K worth of WSO shares, with no buying activity reported.
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6-9 Months
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9-12 Months
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2.2K
986.19K
-986K
-$986K
Top Buyers
No buying activity
Top Sellers
Custer John Michael
Director
$986K
Insider Activity Analysis
Net Insider Sentiment
Strong bearish signal with $986K net selling. Heavy insider selling may indicate concerns about valuation or near-term prospects.
Buy/Sell Ratio
Very poor ratio. Heavy selling with minimal buying suggests insiders may be concerned about valuation or outlook.
Insider Participation
1 insider sellers vs. 0 buyers. Widespread selling across multiple insiders may signal concerns.
wso Dividend History
Learning Layer
Related Guides
Build conviction on WSO by pairing this stock hub with focused valuation guides.
Research Paths
Snapshot
Start with context, operating signals, and key market metrics.
Value Model
Stress test fair value across bear, base, and bull assumptions.
Statements
Validate revenue quality, margins, and balance sheet durability.
Earnings Call
Read management commentary and compare it with reported outcomes.
Dividends
Check payout sustainability and long-term distribution behavior.
Analyst Expectations
Review consensus spread and where estimate risk is concentrated.