One-glance verdict
Within fair range
$343.41 our estimate vs market $303.00
Wall Street consensus: $347.70 (1.2% higher than our fair-value estimate)
12% below our estimate
Fundamentals snapshot
Watsco, Inc.
WSO · NYQ · Industrials · Industrial Distribution
Current price
$303.00
52-week range
$277.34 - $459.00
Market cap
$12.62B
Balance sheet
Healthy
140.77x Strong cushion
Net cash $94.98M. 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 16.2% on equity, ahead of 20% of its peers.
- Risk Operating margin compressed from 11.1% to 10.1% over 3 years.
- Risk Insider ownership is only 0.4% (peer median: 0.8%).
What this company does
Watsco, Inc.
Watsco is the biggest wholesale distributor of air conditioning, heating, and refrigeration (HVAC) products in North America. They act as a massive warehouse, buying equipment and parts from big brands and selling them to the thousands of local contractors who repair and install HVAC systems in homes and businesses. Because most of their sales are for replacing old or broken units, which is a non-negotiable expense for most people, their business tends to be more stable than companies that rely only on new construction.
How the company got here
Founded in 1956, Watsco started as a manufacturer of parts and tools for the heating, ventilation, air conditioning, and refrigeration (HVAC/R) industry. A major turning point came in 1989 when the company shifted its focus from making products to distributing them, acquiring an 80% stake in Gemaire Distributors. This new direction sparked massive growth, largely by purchasing other distribution companies. Over the years, Watsco has acquired over 70 distributors, transforming into the largest HVAC/R distributor in North America.
What it actually does
Watsco doesn't make air conditioners or furnaces; it acts as a giant middleman. The company buys heating and cooling equipment, parts, and supplies in bulk from manufacturers and sells them to local contractors and dealers. Think of it as a one-stop shop for the professionals who install or repair the HVAC/R systems in homes and buildings. These contractors rely on Watsco to have the specific parts and equipment they need in stock for quick access, which is crucial when a customer's air conditioning breaks down in the middle of summer.
HVAC Equipment
This is the company's largest business area, making up the majority of its sales. It involves selling finished units like residential central air conditioners, furnaces, and commercial heating and cooling systems. The customers are professional contractors who are either replacing old, broken systems in existing homes and buildings or installing systems in new construction projects. Watsco's large scale allows it to offer a wide variety of brands and models to these contractors.
Parts and Supplies
Beyond the big equipment, Watsco sells all the smaller components and supplies needed for installation and repairs. This includes items like replacement compressors (the 'engine' of an AC unit), motors, thermostats, copper tubing, and insulation materials. This part of the business is vital because repairs and maintenance are a constant need, regardless of new construction activity. By stocking everything a contractor might need, Watsco makes their job easier and becomes an essential partner for their day-to-day work.
Commercial Refrigeration
A smaller but important part of the business involves distributing refrigeration equipment for commercial use. This includes products like walk-in coolers, ice machines, and the specialized compressors and valves used in supermarkets, restaurants, and other businesses. The customers are contractors who specialize in servicing these commercial refrigeration systems. This segment provides another stream of revenue (the money a company brings in from sales) and helps diversify its product offerings.
What management is betting on now
Watsco's main strategy is to continue its "buy and build" approach: acquiring smaller, family-owned distributors and then helping them grow by providing access to more products and technology. The company is heavily investing in technology, spending over $60 million a year on digital tools to make it easier for contractors to order parts, create quotes for homeowners, and manage their work. Management believes these tech platforms give them a competitive edge in a fragmented market and will help them continue to gain market share. They are also focused on maintaining a strong financial position with no debt, allowing them to keep acquiring other companies and investing in growth.
Price history
How the share price has moved
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Loading price history…
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 $343.41 vs current price $303.00
Wall Street consensus is the average analyst price target: $347.70 (1.2% higher than our fair-value estimate).
Our most-likely fair value is $343.41 a share — about 13.3% away from today's price of $303.00, so the stock currently looks fairly priced.
Is it drowning in debt?
Healthy
Net cash $95.0M - more cash than debt. Interest coverage 140.8x.
Net debt
$-94.98M
Interest coverage
140.77x
Watsco, Inc.'s profit covers its interest bill about 140.8 times over. which is stronger than every peer shown here.
Healthy
Worse cushion
Baseline
Better cushion
WSO
BASELINE
Watsco, Inc.
Total debt $553.72M Interest coverage 140.77x This is the baseline the peer rows are being compared against.
Total debt $282.30M Interest coverage 31.60x -78% vs WSO Carries about 4.5x less debt cushion than WSO.
Total debt $2.02B Interest coverage 22.70x -84% vs WSO Carries about 6.2x less debt cushion than WSO.
Total debt $6.89B Interest coverage 14.14x -90% vs WSO Carries about 10.0x less debt cushion than WSO.
Total debt $6.71B Interest coverage 3.19x -98% vs WSO Carries about 44.1x 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 16.2% on equity, ahead of 20% of its peers.
-
Free cash flow was positive in 10/10 years.
Risks
-
Operating margin compressed from 11.1% to 10.1% over 3 years.
-
Insider ownership is only 0.4% (peer median: 0.8%).
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)
28.11x
Forward P/E
23.26x
P/B
3.86x
P/S
1.70x
EV/EBITDA
17.46x
PEG ratio
1.11x
Profitability
How much profit each dollar creates
Gross margin
27.2%
Operating margin
10.1%
Net margin
6.3%
ROE
16.2%
ROA
8.3%
Health
Liquidity and balance-sheet strength
Debt / equity
0.16x
Current ratio
3.15x
Quick ratio
1.47x
Total debt
$553.72M
Total cash
$648.70M
Growth
How the business has been compounding
Revenue TTM
$7.28B
Revenue 5Y CAGR
3.6%
EPS TTM
10.78
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
4.5%
Payout ratio
105.4%
Last ex-div date
2026-10-16