Watsco (WSO) and Its Peers Critical Review

Watsco (NYSE:WSO) is one of 158 public companies in the “Trading Companies & Distributors” industry, but how does it contrast to its rivals? We will compare Watsco to related businesses based on the strength of its institutional ownership, analyst recommendations, earnings, valuation, risk, dividends and profitability.

Insider & Institutional Ownership

89.7% of Watsco shares are owned by institutional investors. Comparatively, 51.1% of shares of all “Trading Companies & Distributors” companies are owned by institutional investors. 12.9% of Watsco shares are owned by company insiders. Comparatively, 17.1% of shares of all “Trading Companies & Distributors” companies are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings for Watsco and its rivals, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Watsco	0	8	2	0	2.20
Watsco Competitors	1464	4954	6823	238	2.43

Watsco currently has a consensus price target of $373.62, suggesting a potential upside of 19.87%. As a group, “Trading Companies & Distributors” companies have a potential upside of 8.37%. Given Watsco’s higher probable upside, research analysts clearly believe Watsco is more favorable than its rivals.

Profitability

This table compares Watsco and its rivals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Watsco	6.31%	13.97%	9.69%
Watsco Competitors	1.02%	-33.84%	3.51%

Earnings & Valuation

This table compares Watsco and its rivals revenue, earnings per share and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Watsco	$7.24 billion	$496.99 million	27.53
Watsco Competitors	$6.57 billion	$360.25 million	33.51

Watsco has higher revenue and earnings than its rivals. Watsco is trading at a lower price-to-earnings ratio than its rivals, indicating that it is currently more affordable than other companies in its industry.

Dividends

Watsco pays an annual dividend of $13.20 per share and has a dividend yield of 4.2%. Watsco pays out 116.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. As a group, “Trading Companies & Distributors” companies pay a dividend yield of 2.6% and pay out 34.8% of their earnings in the form of a dividend. Watsco has raised its dividend for 13 consecutive years.

Volatility and Risk

Watsco has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500. Comparatively, Watsco’s rivals have a beta of 1.33, meaning that their average stock price is 33% more volatile than the S&P 500.

Summary

Watsco beats its rivals on 8 of the 15 factors compared.

Watsco Company Profile

Watsco, Inc., together with its subsidiaries, engages in the distribution of air conditioning, heating, refrigeration equipment, and related parts and supplies in the United States and internationally. The company distributes equipment, including 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 comprising 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. Watsco, Inc. was incorporated in 1956 and is headquartered in Miami, Florida.