| Factor | Score | Distribution | Value | Avg | Rank |
|---|---|---|---|---|---|
Valuation | 41 | 27.8x | 17.3x | Around median | |
Growth | 36 | -3.0% | 7.1% | Bottom tier | |
Quality | 74 | 14.7% | 4.5% | Top tier | |
Safety | 91 | 0.2x | 2.6x | Top tier | |
Capital Return | 88 | 3.79% | 0.06% | Top tier | |
Momentum | 33 | -21.5% | -1.6% | Bottom tier | |
Sentiment | 2 | 1 | 3 | Bottom tier |
The floor: what the company is worth if growth stopped today
57% of today's price is what a buyer pays for growth that has not happened yet.
10-year US Treasury yield 4.96% as of 2026-10-22. Estimates computed from company data and analyst targets, not investment advice.
Ten ratios that matter, each compared against its sector median and average — so you can see whether a number is rich or cheap relative to peers in the same sector.
Watsco distributes heating, ventilation, air conditioning, and commercial refrigeration products, parts, and supplies to contractors and institutional customers. The equipment business represents approximately 70% of the mix, while non-equipment products represent approximately 30%, and the company is working to expand the latter share through SupplySync.com, the VCR program, and the Hydros network. It also uses e-commerce, its applications, and the OnCallAir platform to increase contractor engagement, raise the number of products per order, and reduce the cost of serving them over time.
In Q2 of fiscal year 2026 ended 2026-06-30, revenue was $2.1 billion, up 2.1% year over year from $2.1 billion in Q2 of fiscal year 2025. Net income was $163.3 million and diluted earnings per share were $4.05, while gross margin was 27.5% and operating margin was 11.3%. Operating cash flow was negative $2.5 million during the quarter, despite strong cash conversion on a last-12-month basis.
The residential HVAC equipment business led the quarter's performance with 5% growth, supported by higher unit volumes and pricing, while the commercial business declined 8% due to weakness in the VRF category related to the A2L product transition. The commercial refrigeration business benefited from new customers, but its large projects typically carry lower margins. On a last-12-month basis through 2026-06-30, revenue was $7.3 billion, net income was $475.7 million, and free cash flow was $715.1 million.
Q2 FY2026
Last 12 months to 2026-06-30
When: 2026-10-15
Comparison of organic revenue growth with the 4% threshold
Comparison of gross margin with the 27.5% threshold
Comparison of residential HVAC equipment growth with the 5% threshold
The value based on the industry multiple is $308 within a range of $235 to $360, pricing Watsco like its peers using a median multiple of 24.8 times next year's earnings across 20 companies. The discounted cash flow model gives a value of $221 within a range of $183 to $277 and at a discount rate of 10.0%, measuring the value of the cash the business can generate, while the no-growth value is $121 at a discount rate of 10.0% and represents what remains if current after-tax operating profit stays constant forever. The methods agree in their descending order from the industry multiple to cash flow and then the no-growth scenario, but the differences are wide because the peer method prices the company according to the sector, while the cash flow model focuses on cash flows and the final scenario excludes any future expansion. Analyst targets are optimistic by nature, and the cash flow model tends to be conservative, while the analyst consensus on WSO-B remains neutral.
Figures in the text are as of 2026-09-27; the live price is shown at the top of the page.
Watsco distributes residential and commercial HVAC equipment, refrigeration products, parts, and supplies to contractors and institutional customers. The equipment business represents approximately 70% of the mix, compared with approximately 30% for non-equipment products. SupplySync.com, VCR, and Hydros are working to increase sales of the latter category by using the company's network, inventory, and supplier relationships.
In Q2 of fiscal year 2026 ended 2026-06-30, revenue was $2.1 billion, up 2.1% year over year. Net income was $163.3 million and diluted earnings per share were $4.05, with a gross margin of 27.5% and an operating margin of 11.3%. Operating cash flow was negative $2.5 million during the quarter.
Watsco closed the acquisition of Jackson Supply on 2026-06-01, adding a business generating $230 million in annual sales across 25 locations in the Sunbelt region. Jackson Supply contributed approximately $20 million to June 2026 revenue. On
Automated analysis for informational purposes only — not investment advice.
E-commerce sales grew 13% during the first half of fiscal year 2026 and reached 37% of total sales over the last 12 months. Monthly active users of the company's applications exceeded 70,000 users. OnCallAir was also used in more than 340,000 proposals to homeowners, generating $1.9 billion in gross merchandise value, up 15%.
Gross margin declined 1.8 percentage points to 27.5% in Q2 of fiscal year 2026 ended 2026-06-30, and operating margin declined 1.9 percentage points to 11.3%. The commercial business declined 8% due to weakness in the VRF category, while new construction slowed in Florida and Texas. Debt was $535.3 million compared with cash and investments of $364.2 million at the end of the period.
Organic revenue growth will be important after recording a rate of between 4% and 5% through 2026-07-28. Gross margin will reveal whether the 27.5% level recorded in Q2 of fiscal year 2026 represents a stable base following the difficult comparison with 29.3% in the prior year. Growth in residential HVAC equipment will also show whether the 5% rate recorded in Q2 is sustainable.