Watsco (NYSE: WSO) and Watsco (NYSE:WSO.B) are both mid-cap construction companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, analyst recommendations, valuation, institutional ownership, dividends, profitabiliy and risk.

Risk and Volatility

Watsco has a beta of 0.83, meaning that its stock price is 17% less volatile than the S&P 500. Comparatively, Watsco has a beta of 0.79, meaning that its stock price is 21% less volatile than the S&P 500.

Insider and Institutional Ownership

80.9% of Watsco shares are owned by institutional investors. Comparatively, 0.1% of Watsco shares are owned by institutional investors. 13.9% of Watsco shares are owned by company insiders. Comparatively, 14.5% of Watsco shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Watsco pays an annual dividend of $5.00 per share and has a dividend yield of 3.3%. Watsco pays an annual dividend of $5.00 per share. Watsco pays out 93.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Watsco pays out 93.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Watsco has raised its dividend for 3 consecutive years. Watsco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Watsco 4.29% 14.52% 9.25%
Watsco 4.29% 14.52% 9.25%

Earnings & Valuation

This table compares Watsco and Watsco’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Watsco $4.30 billion 1.16 $376.63 million $5.37 28.31
Watsco N/A N/A N/A $5.37 N/A

Watsco has higher revenue and earnings than Watsco. Watsco is trading at a lower price-to-earnings ratio than Watsco, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings for Watsco and Watsco, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Watsco 1 2 3 0 2.33
Watsco 0 0 0 0 N/A

Watsco presently has a consensus target price of $161.75, indicating a potential upside of 6.41%.

Summary

Watsco beats Watsco on 7 of the 8 factors compared between the two stocks.

About Watsco

Watsco, Inc. is a distributor of air conditioning, heating and refrigeration equipment, and related parts and supplies (HVAC/R) in the HVAC/R distribution industry in North America. As of December 31, 2016, the Company sold a range of non-equipment products, representing more than 300,000 stock keeping units, including parts, ductwork, air movement products, insulation, tools, installation supplies, thermostats and air quality products. It distributes products consisting of equipment, including residential ducted and ductless air conditioners ranging from 1 to 5 tons, gas, electric and oil furnaces ranging from 50,000 to 150,000 British Thermal Units, commercial air conditioning and heating equipment and systems ranging from 1.5 to 25 tons and other specialized equipment; parts, including replacement compressors and motors, and supplies, including ductwork, grills, registers, sheet metal, adhesives and other ancillary supplies. It also sells products to the refrigeration market.

About Watsco

Watsco, Inc. is a distributor of air conditioning, heating and refrigeration equipment, and related parts and supplies (HVAC/R) in the HVAC/R distribution industry in North America. As of December 31, 2016, the Company sold a range of non-equipment products, representing more than 300,000 stock keeping units, including parts, ductwork, air movement products, insulation, tools, installation supplies, thermostats and air quality products. It distributes products consisting of equipment, including residential ducted and ductless air conditioners ranging from 1 to 5 tons, gas, electric and oil furnaces ranging from 50,000 to 150,000 British Thermal Units, commercial air conditioning and heating equipment and systems ranging from 1.5 to 25 tons and other specialized equipment; parts, including replacement compressors and motors, and supplies, including ductwork, grills, registers, sheet metal, adhesives and other ancillary supplies. It also sells products to the refrigeration market.

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