WSO
Watsco, Inc.
$375.17
Platform & Compounding FCF
50%
Two-stage FCF DCF
Moderate
·
Conviction
Overvalued
Trading 33.6% above fair value
You pay
$375.17
Bear
$227.00
Fair
$280.83
Bull
$330.25
Bear
$227.00
-39.5%
4% stage 1 growth, 11% discount
Fair
$280.83
-25.1%
7% stage 1 growth, 11% discount
Bull
$330.25
-12.0%
10% stage 1 growth, 11% discount
Key Value Driver
FCF growth rate (7% base case)
Terminal Value % of EV
37%
Implied Market Multiple
28.0x
Summary
Our base-case estimate uses a two-stage discounted cash flow model based on free cash flow. We then blend that result with the average analyst price target of $399.80 from 26 analysts, using a 25% weight on analyst consensus. That produces an estimated intrinsic value of $280.83 per share.
Warnings
Wall Street's average price target is $399.80 (from 26 analysts). Our estimate is 40% below the consensus -- consider that gap carefully.
Key Risks
- P/E alone misleads — earnings depressed by growth investment
- Cyclical or commodity businesses may be misclassified as platforms
- Terminal value dominance suggests sensitivity to long-run assumptions