MeritValue

WATSCO INC

WSOdata completeness 88%18 fiscal years on file
The thesis, from the filings

WATSCO INC earns about 32% on invested capital, far above its ~9% cost of capital, but has diluted owners by 7% over 5 years — a real edge showing up in the numbers. The estimate methods put fair value between $146.63 and $223.03 a share.Whether it’s worth owning at today’s price is the last question — and yours to answer, below.

i. The business — what you’d actually own
FigureFY 2021FY 2022FY 2023FY 2024FY 2025
Revenue$6.28B1$7.27B2$7.28B3$7.62B3$7.24B3
Net income$418.9M4$601.2M5$536.3M6$536.3M6$497M6
Operating cash flow$349.6M7$572M8$562M9$773.1M9$569.6M9
Capital expenditure$25.5M10$35.7M11$35.5M12$30.1M12$34.6M12
Free cash flow (derived)$324.1M7$536.3M8$526.5M9$743M9$535.1M9
Total debt—————
Cash & equivalents$118.3M13$147.5M14$210.1M15$526.3M16$433.3M16
Diluted shares35.4M—36.5M37.5M37.9M

Superscripts are receipts. Each links to the SEC filing the number came from (full list at the bottom).

ii. Your slice — ownership made literal
If you owned
shares
Net assets behind them
$733.88
your share of equity
Profit it earned you last year
$131.13
Free cash flow it threw off
$141.18
Debt you’d be carrying
—

10 shares is a claim on $733.88 of net worth that earned you $131.13 and generated $141.18 of cash last year.

iii. Is this a good business?
Moat signal · return on invested capital
32% avg · 5y
FY21 32%FY22 40%FY23 31%FY24 31%FY25 26%

It earned about 32% on invested capital, year after year, against a ~9% cost of capital — the footprint of real pricing power. Competition usually drags returns like this back down; here it hasn't.

seeing a moat in the numbers →
Management signal · capital allocation
+7% shares · 5y

Share count is up 7% over 5 years — owners have been diluted. Worth asking what they got for it.

reading capital allocation →

Signals, not verdicts — read from the filings above. Numbers don’t prove a moat; they show its footprint. You decide.

iv. What it’s worth — engine v0.1.0

The 3 estimate methods that apply put fair value between $146.63 and $223.03 a share. They rest on different assumptions, so where they diverge is the story; the Graham Number is a stricter floor, not a target.

DCF · Growth Exit 10Y
$213.81
assumptions (10)
  • riskFreeRate4.7%
  • equityRiskPremium5.0%
  • beta100.0%
  • equityWeight85.0%
  • costOfDebtSpread1.5%
  • taxRate21.0%
  • terminalGrowth2.5%
  • projectionYears10
  • fcfGrowth1.1%
  • fcfBase$535.1M
DCF · Growth Exit 5Y
$223.03
assumptions (10)
  • riskFreeRate4.7%
  • equityRiskPremium5.0%
  • beta100.0%
  • equityWeight85.0%
  • costOfDebtSpread1.5%
  • taxRate21.0%
  • terminalGrowth2.5%
  • projectionYears5
  • fcfGrowth1.1%
  • fcfBase$535.1M
Earnings Power Value
$146.63
assumptions (8)
  • riskFreeRate4.7%
  • equityRiskPremium5.0%
  • beta100.0%
  • equityWeight85.0%
  • costOfDebtSpread1.5%
  • taxRate21.0%
  • normalizedEarnings$536.3M
  • growthAssumed0.0%
Graham Number
$142.22
assumptions (1)
  • grahamMultiplier2250.0%

Different models answer different questions — which to trust when →

v. The price question — last, on purpose
Is today’s price fair?
See live price ↗
Type a price. The ledger answers.
Or set your own belief
FCF growth, next 5 years1.1%
Discount rate (WACC)8.93%
Terminal growth2.5%
At your growth, a share is worth $223.03
The three cases
Bear0.0%$213.14
Base1.1%$223.03
Bull6.1%$273.84

Bear/base/bull growth = 0% / filed history / history + 5pp. Type a price to see the return each case implies.

Default growth 1.1%= this company’s own filed history (median-to-median FCF CAGR, clamped 0–20%). Your adjustments are recorded anonymously. They become the “what do owners actually believe” dataset.

Sources — the receipts
  1. 10-K · period ending 2021-12-31 · accession 0001193125-24-044609 (Revenues)
  2. 10-K · period ending 2022-12-31 · accession 0001193125-25-041730 (Revenues)
  3. 10-K · period ending 2023-12-31 · accession 0001193125-26-082486 (Revenues)
  4. 10-K · period ending 2021-12-31 · accession 0001193125-24-044609 (NetIncomeLoss)
  5. 10-K · period ending 2022-12-31 · accession 0001193125-25-041730 (NetIncomeLoss)
  6. 10-K · period ending 2023-12-31 · accession 0001193125-26-082486 (NetIncomeLoss)
  7. 10-K · period ending 2021-12-31 · accession 0001193125-24-044609 (NetCashProvidedByUsedInOperatingActivities)
  8. 10-K · period ending 2022-12-31 · accession 0001193125-25-041730 (NetCashProvidedByUsedInOperatingActivities)
  9. 10-K · period ending 2023-12-31 · accession 0001193125-26-082486 (NetCashProvidedByUsedInOperatingActivities)
  10. 10-K · period ending 2021-12-31 · accession 0001193125-24-044609 (PaymentsToAcquirePropertyPlantAndEquipment)
  11. 10-K · period ending 2022-12-31 · accession 0001193125-25-041730 (PaymentsToAcquirePropertyPlantAndEquipment)
  12. 10-K · period ending 2023-12-31 · accession 0001193125-26-082486 (PaymentsToAcquirePropertyPlantAndEquipment)
  13. 10-K · period ending 2021-12-31 · accession 0001193125-23-048758 (CashAndCashEquivalentsAtCarryingValue)
  14. 10-K · period ending 2022-12-31 · accession 0001193125-24-044609 (CashAndCashEquivalentsAtCarryingValue)
  15. 10-K · period ending 2023-12-31 · accession 0001193125-25-041730 (CashAndCashEquivalentsAtCarryingValue)
  16. 10-K · period ending 2024-12-31 · accession 0001193125-26-082486 (CashAndCashEquivalentsAtCarryingValue)