WSO – Market expectations are for Uniform ROA to fade, and management may have concerns about profitability and emission regulations

April 20, 2022

  • Watsco, Inc. (WSO) currently trades near corporate yet above historical averages relative to Uniform earnings, with a 1.9x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to fade to 2%, accompanied by 3% Uniform asset growth.

  • Meanwhile, analysts expect Uniform ROA to compress to 22% by 2023, accompanied by 3% Uniform asset growth.

  • If sustained going forward, these levels would imply a stock price closer to $296, representing approximately 13% equity upside for the firm.

  • However, the firm’s most recent earnings call suggests management may have concerns about profitability and emission regulations.

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