WSO Intrinsic Value

WSO

Watsco Inc. – Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers

watsco, inc. (nyse:wso) is the largest distributor of heating, air conditioning, and refrigeration (hvac/r) products with 507 locations in 36 states, puerto rico, latin america and the caribbean. founded more than 50 years ago as a manufacturer of parts and components for hvac/r equipment, watsco entered the distribution segment in 1989 and has become the industry leader with sales of $2.0 billion in 2009. watsco has 4,000 employees assisting over 50,000 contractors who, in turn, service, repair or replace hvac/r systems. watsco meets contractor’s needs by supplying the products required for the four major industry segments: air conditioners, furnaces and related parts (50%) air movement products, including ductwork and insulation (25%) controls, including thermostats and air treatment systems (15%) refrigeration products (10%)

Analysis Results

Intrinsic Value	$675.38
Latest Price	$359.99
Relative Value	47% undervalued

Share results:

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Cash Flow (Billions)

Analysis Parameters

New Ticker

Analysis Details

Growth Rate Projection

An exponential growth model was fit to the past cash flow data, giving more weight to more recent years. This model determined a growth rate estimate of 21.3%.

Weighted Average Cost of Capital (WACC)

The calculated WACC is 9.9%. This value is used as the default discount rate.

Value of Future Flows

Assuming a growth rate of 21.3%, the cash flows for the next 5 years are projected.

The present value of each year's flow is adjusted to present value using the discount rate.

Year	Future flow (billion)	Present value (billion)
2023	1.06	0.961
2024	1.28	1.06
2025	1.55	1.17
2026	1.88	1.29
2027	2.28	1.42

Terminal Value

Assuming a growth rate after the projection years of 2.0%, the terminal value of the company would be 29.5 billion. This corresponds to a present value of 16.7 billion.

Intrinsic Value Per Share

The total present value of the projected cash flows is 5.91 billion. Adding in the terminal value gives a total present value of 22.7 billion.

There are presently 33.5 million outstanding shares, so the intrinsic value per share is 675.38.

Financial Statements

The following data was to determine the past cash flows.

Current Assets	2,298,739,000
Current Cash	147,505,000
Current Liabilities	906,522,000
Current Debt	146,997,000
Non-Cash Working Capital (NCWC)	1,391,709,000
Change in NCWC	190,798,000
EBIT	831,578,000
Tax Provision	125,717,000
Depreciation and Amortization	31,683,000
Capital Expenditure	-35,652,000
Unlevered Free Cash Flow	892,361,843

Current Assets	1,961,400,000
Current Cash	118,268,000
Current Liabilities	726,722,000
Current Debt	84,501,000
Non-Cash Working Capital (NCWC)	1,200,911,000
Change in NCWC	277,874,000
EBIT	628,528,000
Tax Provision	128,797,000
Depreciation and Amortization	28,127,000
Capital Expenditure	-25,464,000
Unlevered Free Cash Flow	780,063,577

Current Assets	1,484,445,000
Current Cash	146,067,000
Current Liabilities	487,145,000
Current Debt	71,804,000
Non-Cash Working Capital (NCWC)	923,037,000
Change in NCWC	-156,943,000
EBIT	401,034,000
Tax Provision	76,623,000
Depreciation and Amortization	25,908,000
Capital Expenditure	-16,436,000
Unlevered Free Cash Flow	176,702,538

Current Assets	1,546,730,000
Current Cash	74,454,000
Current Liabilities	461,717,000
Current Debt	69,421,000
Non-Cash Working Capital (NCWC)	1,079,980,000
Change in NCWC	78,388,000
EBIT	366,884,000
Tax Provision	67,077,000
Depreciation and Amortization	24,512,000
Capital Expenditure	-17,805,000
Unlevered Free Cash Flow	384,156,642

Current Assets	1,441,806,000
Current Cash	82,894,000
Current Liabilities	357,566,000
Current Debt	246,000
Non-Cash Working Capital (NCWC)	1,001,592,000
Change in NCWC	160,924,000
EBIT	372,082,000
Tax Provision	72,813,000
Depreciation and Amortization	22,095,000
Capital Expenditure	-17,153,000
Unlevered Free Cash Flow	464,594,829

Current Assets	1,337,397,000
Current Cash	80,496,000
Current Liabilities	416,477,000
Current Debt	244,000
Non-Cash Working Capital (NCWC)	840,668,000
Change in NCWC	-28,790,000
EBIT	353,874,000
Tax Provision	90,221,000
Depreciation and Amortization	22,033,000
Capital Expenditure	-17,876,000
Unlevered Free Cash Flow	237,368,034

Current Assets	1,240,156,000
Current Cash	56,010,000
Current Liabilities	314,888,000
Current Debt	200,000
Non-Cash Working Capital (NCWC)	869,458,000
Change in NCWC	-6,461,000
EBIT	345,632,000
Tax Provision	105,936,000
Depreciation and Amortization	20,066,000
Capital Expenditure	-43,577,000
Unlevered Free Cash Flow	208,573,609

Current Assets	1,181,265,000
Current Cash	35,229,000
Current Liabilities	270,301,000
Current Debt	184,000
Non-Cash Working Capital (NCWC)	875,919,000
Change in NCWC	29,884,000
EBIT	336,748,000
Tax Provision	104,677,000
Depreciation and Amortization	19,117,000
Capital Expenditure	-23,698,000
Unlevered Free Cash Flow	255,620,855

Current Assets	1,157,335,000
Current Cash	24,447,000
Current Liabilities	287,022,000
Current Debt	169,000
Non-Cash Working Capital (NCWC)	846,035,000
Change in NCWC	87,810,000
EBIT	305,747,000
Tax Provision	91,839,000
Depreciation and Amortization	17,927,000
Capital Expenditure	-21,512,000
Unlevered Free Cash Flow	296,542,156

Current Assets	1,021,102,000
Current Cash	19,478,000
Current Liabilities	243,506,000
Current Debt	107,000
Non-Cash Working Capital (NCWC)	758,225,000
Change in NCWC	98,898,000
EBIT	271,209,000
Tax Provision	77,660,000
Depreciation and Amortization	17,706,000
Capital Expenditure	-14,580,000
Unlevered Free Cash Flow	293,866,920

Current Assets	1,015,451,000
Current Cash	73,770,000
Current Liabilities	282,358,000
Current Debt	4,000
Non-Cash Working Capital (NCWC)	659,327,000
Change in NCWC	49,843,000
EBIT	224,908,000
Tax Provision	62,642,000
Depreciation and Amortization	15,911,000
Capital Expenditure	-12,317,000
Unlevered Free Cash Flow	214,376,170

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