One-glance verdict
Within fair range
$306.00 our estimate vs market $314.22
Wall Street consensus: $379.00 (23.9% higher than our fair-value estimate)
3% above our estimate
Fundamentals snapshot
Watsco, Inc.
WSO · NYQ · Industrials · Industrial Distribution
Current price
$314.22
52-week range
$295.75 - $459.00
Market cap
$12.96B
Balance sheet
Healthy
140.77x Strong cushion
Net debt $71.08M. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
2 Risks
3 rewards · 2 risks
- Reward Revenue grew 0.6% last year.
- Reward Returns 16.7% on equity, ahead of 20% of its peers.
- Risk Insider ownership is only 0.4% (peer median: 1.8%).
- Risk Operating margin compressed from 11.1% to 10.9% over 3 years.
What this company does
Watsco, Inc.
Watsco is the largest distributor of air conditioning and heating systems, acting as the main supplier for the local technicians who install and repair climate control in homes and businesses. The company makes most of its money from the constant need to replace and repair existing units, which creates a steady business that is less dependent on the new home construction market. This focus on the replacement market provides a high degree of recurring revenue (predictable sales that are likely to continue in the future), since people always need to fix their AC and heating.
How the company got here
Founded in 1945, Watsco began as a manufacturer of heating, ventilation, and air conditioning (HVAC) parts and tools. A major shift happened in 1973 when Albert H. Nahmad took control and started a series of acquisitions. The most important turning point came in 1989 when Watsco acquired Gemaire, a large distributor, moving the company's focus from making products to distributing them. Since then, it has grown by buying other distribution companies, becoming the largest distributor of HVAC and refrigeration products in North America.
What it actually does
Watsco doesn't make air conditioners or furnaces; instead, it acts as a giant middleman. The company buys heating, ventilation, air conditioning, and refrigeration (HVAC/R) equipment in bulk from manufacturers. It then sells these products, along with all the necessary parts and supplies like thermostats and copper tubing, to local contractors and technicians who install and repair systems in homes and buildings. Think of them as a one-stop shop for the professionals who fix your air conditioner or heater.
HVAC/R Distribution
This is the company's only line of business and accounts for all of its revenue. Watsco operates a network of hundreds of local branches where contractors can buy everything they need for a job. The business is broken down into a few main product categories: HVAC equipment (like air conditioners and furnaces) makes up the majority of sales, followed by other HVAC products (like parts and supplies), and a smaller portion from commercial refrigeration products. Their customers are the thousands of local contractors and dealers who service both the replacement market (fixing old systems) and the new construction market.
What management is betting on now
Watsco's main strategy is to keep growing by acquiring smaller, regional distributors to expand its footprint in a fragmented market. A huge focus is on technology, where they are investing heavily in digital tools to make it easier for contractors to do business. This includes mobile apps for ordering products and software that helps contractors create sales proposals for homeowners. By embedding these technologies into their customers' daily work, Watsco aims to become an indispensable partner, which helps them sell more products and keep customers loyal.
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q3
$222.97M
FY2024 Q4
$370.87M
FY2025 Q1
$-185.19M
FY2025 Q2
$-14.28M
FY2025 Q3
$346.06M
FY2025 Q4
$388.47M
FY2026 Q1
$-25.87M
FY2026 Q2
$-11.52M
Revenue
$2.10B
Net income
$163.34M
Diluted EPS
4.00
Operating cash flow
$-2.54M
Free cash flow
$-11.52M
Fetching…
Sources
Revenue
$1.53B
Net income
$79.07M
Diluted EPS
1.87
Operating cash flow
$-18.91M
Free cash flow
$-25.87M
Fetching…
Sources
Revenue
$1.58B
Net income
$71.75M
Diluted EPS
1.82
Operating cash flow
$399.77M
Free cash flow
$388.47M
Fetching…
Sources
Revenue
$2.07B
Net income
$161.57M
Diluted EPS
3.98
Operating cash flow
$354.94M
Free cash flow
$346.06M
Fetching…
Sources
Revenue
$2.06B
Net income
$183.61M
Diluted EPS
4.52
Operating cash flow
$-7.45M
Free cash flow
$-14.28M
Fetching…
Sources
Revenue
$1.53B
Net income
$80.06M
Diluted EPS
1.93
Operating cash flow
$-177.64M
Free cash flow
$-185.19M
Fetching…
Sources
Revenue
$1.75B
Net income
$96.84M
Diluted EPS
2.42
Operating cash flow
$378.90M
Free cash flow
$370.87M
Fetching…
Sources
Revenue
$2.16B
Net income
$171.03M
Diluted EPS
4.22
Operating cash flow
$232.76M
Free cash flow
$222.97M
Fetching…
Sources
Is it cheap or expensive?
Fair value $306.00 vs current price $314.22
Wall Street consensus is the average analyst price target: $379.00 (23.9% higher than our fair-value estimate).
Our most-likely fair value is $306.00 a share — about 2.6% away from today's price of $314.22, so the stock currently looks fairly priced.
Is it drowning in debt?
Healthy
Net debt $71.1M. Interest coverage 140.8x.
Net debt
$71.08M
Interest coverage
140.77x
Watsco, Inc.'s profit covers its interest bill about 140.8 times over. which is stronger than most peers shown here.
Healthy
Worse cushion
Baseline
Better cushion
WSO
BASELINE
Watsco, Inc.
Total debt $535.27M Interest coverage 140.77x This is the baseline the peer rows are being compared against.
Total debt $6.89B Interest coverage 14.14x -90% vs WSO Carries about 10.0x less debt cushion than WSO.
Total debt $2.80B Interest coverage 30.80x -78% vs WSO Carries about 4.6x less debt cushion than WSO.
Total debt $441.50M Interest coverage 267.05x +90% vs WSO Carries about 1.9x more debt cushion than WSO.
Total debt $555.42M Interest coverage 12.99x -91% vs WSO Carries about 10.8x less debt cushion than WSO.
Total debt $2.75B Interest coverage 6.02x -96% vs WSO Carries about 23.4x less debt cushion than WSO.
What you should know
The case for and against WSO
3 Rewards
2 Risks
Rewards
-
Revenue grew 0.6% last year.
-
Returns 16.7% on equity, ahead of 20% of its peers.
-
Free cash flow was positive in 10/10 years.
Risks
-
Insider ownership is only 0.4% (peer median: 1.8%).
-
Operating margin compressed from 11.1% to 10.9% over 3 years.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
26.95x
Forward P/E
23.67x
P/B
4.05x
P/S
1.78x
EV/EBITDA
18.08x
PEG ratio
1.20x
Profitability
How much profit each dollar creates
Gross margin
27.5%
Operating margin
10.9%
Net margin
6.5%
ROE
16.7%
ROA
8.4%
Health
Liquidity and balance-sheet strength
Debt / equity
0.15x
Current ratio
3.20x
Quick ratio
1.41x
Total debt
$535.27M
Total cash
$464.19M
Growth
How the business has been compounding
Revenue TTM
$7.28B
Revenue 5Y CAGR
3.6%
EPS TTM
11.66
EPS 5Y CAGR
-6.9%
Cash flow
How much cash the business throws off
Operating CF TTM
$733.26M
Free CF TTM
$535.06M
FCF margin
7.3%
Dividend
Shareholder payout
Yield
4.2%
Payout ratio
105.4%
Last ex-div date
2026-07-16