DCF Tool

WSO

Watsco Inc. – Warm Air Heating and Air-Conditioning Equipment and Supplies Merchant Wholesalers
Watsco is the largest distribution network for heating, air conditioning and refrigeration (HVAC/R) products with locations in the United States, Canada, Mexico and Puerto Rico, and on an export basis to Latin America and the Caribbean. Watsco estimates that over 300,000 contractors and technicians visit or call one of its 600 locations each year to get information, obtain technical support and buy products. HVAC/R products provide comfort to homes and businesses regardless of the outdoor climate. Older systems often operate below today's government mandated energy efficiency and environmental standards. Watsco has an opportunity to accelerate the replacement of these systems at a scale greater than its competitors as the movement toward reducing energy consumption and its environmental impact continues. This is especially important since heating and cooling accounts for approximately half of the energy consumed in a typical U.S. home.
Analysis Results
Intrinsic Value $538.40
Latest Price $263.80
Relative Value 51% undervalued
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Cash Flow (Billions)
Analysis Parameters
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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 18.0%.

Weighted Average Cost of Capital (WACC)

The calculated WACC is 8.8%. This value is used as the default discount rate.

Value of Future Flows

Assuming a growth rate of 18.0%, 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)
2022 0.779 0.716
2023 0.919 0.776
2024 1.08 0.842
2025 1.28 0.913
2026 1.51 0.99
Terminal Value

Assuming a growth rate after the projection years of 2.0%, the terminal value of the company would be 22.7 billion. This corresponds to a present value of 13.7 billion.

Intrinsic Value Per Share

The total present value of the projected cash flows is 4.24 billion. Adding in the terminal value gives a total present value of 17.9 billion.

There are presently 33.3 million outstanding shares, so the intrinsic value per share is 538.4.

Financial Statements

The following data was to determine the past cash flows.

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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