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Watsco Inc  (NYSE:WSO) E10: $3.63 (As of Sep. 2017)

E10 is a concept invented by Prof. Robert Shiller, who uses E10 for his Shiller P/E calculation. E10 is the average of the inflation adjusted earnings of a company over the past 10 years.

Watsco Inc's adjusted earnings per share data for the three months ended in Sep. 2017 was $1.820. Add all the adjusted EPS for the past 10 years together and divide 10 will get our e10, which is $3.63 for the trailing ten years ended in Sep. 2017.

As of today, Watsco Inc's current stock price is $164.90. Watsco Inc's E10 for the quarter that ended in Sep. 2017 was $3.63. Watsco Inc's Shiller PE Ratio of today is 45.43.

During the past 13 years, the highest Shiller PE Ratio of Watsco Inc was 47.81. The lowest was 17.01. And the median was 31.95.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Watsco Inc Annual Data

Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16
E10 Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 2.44 2.68 2.89 3.10 3.32

Watsco Inc Quarterly Data

Dec12 Mar13 Jun13 Sep13 Dec13 Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17
E10 Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 3.29 3.32 3.38 3.52 3.63

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Calculation

E10 is a concept invented by Prof. Robert Shiller, who uses E10 for his Shiller P/E calculation. When we calculate the today's Shiller P/E ratio of a stock, we use today’s price divided by E10.

What is E10? How do we calculate E10?

E10 is the average of the inflation adjusted earnings of a company over the past 10 years. Let's use an example to explain.

If we want to calculate the E10 of Wal-Mart (WMT) for Dec. 31, 2010, we need to have the inflation data and the earnings from 2001 through 2010.

We adjusted the earnings of 2001 earnings data with the total inflation from 2001 through 2010 to the equivalent earnings in 2010. If the total inflation from 2001 to 2010 is 40%, and Wal-Mart earned $1 a share in 2001, then the 2001's equivalent earnings in 2010 is $1.4 a share. If Wal-Mart earns $1 again in 2002, and the total inflation from 2002 through 2010 is 35%, then the equivalent 2002 earnings in 2010 is $1.35. So on and so forth, you get the equivalent earnings of past 10 years. Then you add them together and divided the sum by 10 to get E10.

For example, Watsco Inc's adjusted earnings per share data for the three months ended in Sep. 2017 was:

Adj_EPS= Earnings per Share (Diluted) /CPI of Sep. 2017 (Change)*Current CPI (Sep. 2017)
=1.82/246.819*246.819
=1.820

Current CPI (Sep. 2017) = 246.819.

Watsco Inc Quarterly Data

per share eps CPI Adj_EPS
200712 0.250 210.036 0.294
200803 0.280 213.528 0.324
200806 0.900 218.815 1.015
200809 0.810 218.783 0.914
200812 0.110 210.228 0.129
200903 -0.070 212.709 -0.081
200906 0.560 215.693 0.641
200909 0.660 215.969 0.754
200912 0.190 215.949 0.217
201003 0.100 217.631 0.113
201006 1.080 217.965 1.223
201009 0.970 218.439 1.096
201012 0.320 219.179 0.360
201103 0.210 223.467 0.232
201106 1.090 225.722 1.192
201109 1.020 226.889 1.110
201112 0.400 225.672 0.437
201203 0.230 229.392 0.247
201206 1.150 229.478 1.237
201209 1.190 231.407 1.269
201212 0.080 229.601 0.086
201303 0.390 232.773 0.414
201306 1.480 233.504 1.564
201309 1.320 234.149 1.391
201312 0.500 233.049 0.530
201403 0.480 236.293 0.501
201406 1.600 238.343 1.657
201409 1.560 238.031 1.618
201412 0.680 234.812 0.715
201503 0.650 236.119 0.679
201506 1.850 238.638 1.913
201509 1.640 237.945 1.701
201512 0.740 236.525 0.772
201603 0.710 238.132 0.736
201606 1.820 241.018 1.864
201609 1.780 241.428 1.820
201612 0.830 241.432 0.849
201703 0.710 243.801 0.719
201706 2.070 244.955 2.086
201709 1.820 246.819 1.820

Add all the adjusted EPS together and divide 10 will get our e10.


Explanation

If a company grows much fast than inflation, E10 may underestimate the company's earnings power. Shiller PE Ratio can seem to be too high even the actual P/E is low.

For the Shiller P/E, the earnings of the past 10 years are inflation-adjusted and averaged. The result is used for P/E calculation. Since it looks at the average over the last 10 years, the Shiller P/E is also called PE10.

The Shiller P/E was first used by professor Robert Shiller to measure the valuation of the overall market. The same calculation is applied here to individual companies.

Watsco Inc's Shiller P/E Ratio of today is calculated as

Shiller PE Ratio=Share Price/E10
=164.90/3.63
=45.43

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

During the past 13 years, the highest Shiller P/E Ratio of Watsco Inc was 47.81. The lowest was 17.01. And the median was 31.95.


Be Aware

Shiller PE Ratio works better for cyclical companies. It gives you a better idea on the company's real earnings power.


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