_edited.png)
RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
Watsco, Inc. (XNYS:WSO) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
WSO
Name:
WATSCO, INC. (XNYS:WSO)
Sector:
- 109946.00K
Industry:
Industrial Distribution
CEO:
Mr. Albert Nahmad
Total Employees:
6,850
Our Technological Advancement Rating
Our Rating:
A+
Technological advancement compared to industry is 593.65% higher
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF WATSCO, INC.(WSO) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND INDUSTRIAL DISTRIBUTION INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
272
One Month Price Target:
$273.36
Six Month Price Target :
$280.17
Likely Price in One Year's Time:
Ticker:
$288.35
Likely Trading Range Today Under (Normal Volatility)
$271.32
Price Upper limit ($) :
$273.12
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$261.32
This week:
$248.12
This month :
$224.24
Other Primary facts
Market Cap:
10.80B
Market Cap Classification:
Mid Cap
Number of Shares
IPO Date:
38.99M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
16.61%
-10.32%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$321.52
$298.52
$222.48
$245.48
Medium risk (<10%) entry points
Buy Call
Sell Call
$291.03
Buy Put:
Sell Put:
$286.12
$252.90
$257.88
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
WSO
Sharpe Ratio:
3.62%
Comparison:
WSO, is amongst the top 20% stocks with highest risk-adjusted returns
Sharpe ratio is 17.51% higher than the industry
& ratio is 58.82% higher than the market/S&P 500 average
Average Returns/Yield of
WSO
Daily returns:
0.08%
Weekly returns:
0.40%
Monthly returns:
1.59%
Yearly returns:
22.00%
Comparison of returns:
Average annual returns/yield (last 3 years) is -13.31% below industry average
Classification:
WSO, is amongst the top 40% highest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.89
Statistical test of Returns:
WSO has not yielded statistically significant higher returns when compared to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
1.95%
Weekly Volatility:
4.36%
Monthly Volatility:
8.72%
Yearly Volatility:
30.22%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
1.08%
Volatility in last five trading days has been -44.54% below long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-3.93%
Weekly VaR:
-8.78%
Monthly VaR:
-17.56%
How Much Can the price of
WSO
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-15%
Worst case (decline):
-60.83%
This translates to price declining to:
$232.25
This translates to price declining to:
$106.55
Severe Crash Probability
Risk of crash in next 6/12 months: High (50-70%)
What is Value at Risk (VaR)?
Risk Fundamentals
WSO is a 23.94% riskier investment compared to the market/S&P 500 & is 6.18% riskier than Nasdaq (IXIC)
Risk (measured by volatility) is -28.39% below industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
WSO
Beta in relation to market/S&P 500--0.89
Expected beta in 1 year's time:
0.632
Expected beta in 3 year's time:
0.893
Unlevered (debt free) Beta:
0.733
Beta in relation to Nasdaq (XNAS):
0.522
Beta in relation to all global stocks::
0.385
Beta Comparison & Analysis
Beta of competitors/peers::
1.014
Beta is -11.85% lower than peers
Average Industry Beta:
1.265
Beta is -29.31% below industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
8.86%
Sustainable growth rate is -47.44% below industry average
Alpha provided | Alpha Analysis
Alpha provided:
0.098
Alpha is -3.81% below industry average alpha yield
Alpha is 623% higher than market/& is unsustainably high
Analysis of Cost of Capital of
WSO
Equity cost of capital:
0.093
Equity cost of capital is -21.50% below industry mean WACC
Unlevered (without debt) cost of capital:
7.61%
Before-tax cost of debt:
0.26%
After-tax cost of debt:
0.20%
Overall debt rating:
Highest AAA investment grade
Weighted average cost of capital (WACC):
0.20%
WACC is -11.28% below industry mean WACC
Key Per-Share Metrics & Analysis
Revenue per share:
$171.00
Revenue growth rate per share of (3Y):
5.1
Annual revenue growth rate is 135.93% above the industry average
EPS:
$12.25
Expected Annual growth rate of EPS (3Y):
22.27%
Expected future EPS growth rate is -0.61% lower than the Industrial Distribution industry
Free cash flow (FCF) per share:
$7.20
Balance sheet equity growth per share: 36.73%
Equity growth rate per share is 70.61% higher than the industry
Debt per share
$12.27
EBITDA per share
$16.83
Valuation Analysis Today of
WSO
P/E Ratio:
25.24
P/E Ratio of Competitors/Peers:
17.09
P/E ratio is 47.64% higher than main peers & is -2.28% lower than the industry
Stock price/value with industry average P/E ratio: $316.39
WSO is -14.03% undervalued if valued using industry average P/E ratio
Share value as per dividend discount (DDM) model: $154.08
Present value of the expected future dividends only: $140.64
P/S (Price to Sales ratio):
1.59
Price to sales ratio is -11.93% below the industry mean
P/B (Price to book value ratio):
5.1
Price to free cash flow: 37.79
-
Net income growth rate (3Y):
67.50%
Net income growth rate is -426.87% lower than the industry average net income growth rate
Dividend Analysis
Dividend payout rate: 15.88%
Dividend yeild: 2.96%
Previous Dividend: $2.20
Previous adjusted dividend: $2.20
Previous Dividend: $8.05
Expected next dividend best case: $2.35
Expected next dividend worst case: $2.05
Average dividend payment (long-term): $1.85
Average dividend increase/decrease (growth rate) % per period: 3.36%
Expected next dividend payment date: 28/07/2022
Expected next dividend record date: 13/07/2022
-
Previous dividend payment date: 29/04/2022
Previous dividend record date: 14/04/2022
-
Dividend History:
2022-04-13--$2.20
2021-10-14--$1.95
2021-04-14--$1.95
2022-01-13--$1.95
2021-07-14--$1.95
2021-01-14--$1.78
Dividend growth rate is -126.04% lower than the industry average
In-depth Debt & Leverage Analysis
Debt to equity ratio:
27.72%
Net debt to equity ratio:
26.34%
Debt to assets ratio:
13.77%
Net debt to assets ratio:
13.08%
Debt-to-asset ratio is -68.21% below industry average
Ability to repay debt:
Interest coverage ratio:
447.59
Interest coverage ratio is 330.54% more than industry average
Looking forward:
Debt growth rate:
158.39%
Annual debt growth is 655% higher than industry average debt growth rate
Debt repayment rate in last quarter: 0.15%
Analysis of Key Statistics
Correlation of price movement with the market:
0.527
Statistical significance of correlation:
WSO has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.554
Stock price is -4.83% less correlated with the market compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.554
Correlation of price movement with Nasdaq (^IXIC):
0.006
Covariance of price movement with the market:
0.007
Kurtosis
9.521
Returns have a significant fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are more probable, compared to assets with normally distributed returns
Skewness of returns:
0.513
Returns are right (positive) skewed; mean returns are greater than median and mode returns
Fundamental Analysis & Dupont Analysis of
WSO
Gross Profit Margin Ratio:
110%
Operating Profit Margin Ratio:
10.70%
Operating profit margin is 66.48% higher than the industry
Net Profit Margin Ratio:
110%
Effective Tax Rate:
20.77%
Effective tax rate is 4.15% higher than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
27.66%
Return on equity (ROE) is 6.98% higher than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
13.74%
Return on assets (ROA) is 38.71% higher than the industry
Financial Leverage:
1.2x
Current Ratio:
2.77
Current ratio is 11.27% above industry average
Cash Conversion Cycle (days):
62.4
Cash conversion cycle is 95.88% above industry average
The remaining useful life of property plant & equipment is: 2.0 years
Stock based compensation to net income ratio:
1.67%
In-depth Efficiency Analysis
Revenue generated per employee:
973.4K
Each employee generates 72% more revenue than industry average revenue per employee
EBITDA generated per employee:
95.8K
Each employee generates 51% more EBITDA than industry average revenue per employee
Profit generated per employee:
69.7K
Each employee generates 77% more net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
- 16.1K
Each employee generates 12826% more free cash flow than industry average revenue per employee
Assets/Capital per employee
168.4K
Each employee generates 12826% more free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
-
-
Competitors/Peer firms of
WSO
BOOZ ALLEN HAMILTON HOLDING CORPORATION (XNYS:BAH)
SNAP-ON INCORPORATED (XNYS:SNA)
GFL ENVIRONMENTAL INC. (XNYS:GFL)
PENTAIR PUBLIC LIMITED COMPANY (XNYS:PNR)
ALLEGION PUBLIC LIMITED COMPANY (XNYS:ALLE)
LENNOX INTERNATIONAL INC. (XNYS:LII)
ROBERT HALF INTERNATIONAL INC. (XNYS:RHI)
CARLISLE COMPANIES INCORPORATED (XNYS:CSL)
HUBBELL INCORPORATED (XNYS:HUBB)
Current Analyst Ratings
Strong buy�13%
Buy�13%
Hold�25%
Sell�4%
Strong sell�0%
Overall analyst sentiment is: Hold
Income Statement
Period:
TTM
Date:
3/31/22
Revenue:
6.67B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
4.84B
1.82B
-
-
1.12B
-
-
1.12B
-
1.47M
28.82M
656.17M
713.65M
477.15M
716.23M
148.73M
477.15M
Statement of Cash Flow
Date:
Period:
7.59M
Differed Income Tax :
-
Stock Based Compensation :
7.97M
Change in Working Capital :
- 257249.00K
Accounts Receivables:
- 91775.00K
Other Working Capital:
474.00K
Other Non-Cash Items:
5.17M
Net Cash Provided by Operating Activities:
- 101622.00K
Investments in PP&E:
-
Net Acquisitions:
- 47.00K
Purchases of Investments:
-
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
3/31/22
2022
Q1
110.61M
-
110.61M
790.01M
1.39B
29.21M
2.32B
404.05M
434.14M
188.00M
118.85M
-
8.73M
1.15B
-
3.47B
462.57M
86.81M
-
-
287.46M
836.84M
478.30M
-
556.34M
-
1.39B
21.91M
798.30M
- 31241.0K
936.24M
March 31, 2022 at 6:00:00 AM
5.97B
1.73B
3.12B
-
565.11M
454.5M
-
- 8171.00K
- 8218.00K
- 713.00K
4.42M
-
- 75795.00K
173.50M
101.41M
767.00K
- 7661.00K
110.61M
118.27M
- 101622.00K
- 8324.00K
- 109946.00K
Our Proprietary Portfolio Rating
Our Rating:
A
Price Forecast/Expected Price in Next 5 Years of
WSO
2023
2024
2025
2026
2027
$289.79
$307.21
$325.67
$345.24
$365.99