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GuruFocus has detected 5 Warning Signs with Watsco Inc $WSO.
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Watsco Inc (NYSE:WSO)
Intrinsic Value: Projected FCF
$75.42 (As of Today)

Since the intrinsic value calculations based on Discounted Cash Flow Intrinsic Value: DCF (FCF Based), or Discounted Earnings Intrinsic Value: DCF (Earnings Based) cannot be applied to companies without consistent revenue and earnings, GuruFocus developed a valuation model based on normalized Free Cash Flow and Book Value of the company. The details of how we calculate the intrinsic value of stocks are described in detail here.

As of today, Watsco Inc's projected FCF intrinsic value is $75.42. The stock price of Watsco Inc is $141.33. Therefore, Watsco Inc's Price to Intrinsic Value: Projected FCF Ratio of today is 1.9.

WSO' s Price-to-Intrinsic-Value-Projected-FCF Range Over the Past 10 Years
Min: 0.77   Max: 19.19
Current: 1.87

0.77
19.19

During the past 13 years, the highest Price to Intrinsic Value: Projected FCF Ratio of Watsco Inc was 19.19. The lowest was 0.77. And the median was 1.43.

WSO's Price-to-Intrinsic-Value-Projected-FCF is ranked lower than
63% of the 1273 Companies
in the Global Electronics Distribution industry.

( Industry Median: 1.27 vs. WSO: 1.87 )

Definition

Since the intrinsic value calculations based on Discounted Cash Flow Intrinsic Value: DCF (FCF Based), or Discounted Earnings Intrinsic Value: DCF (Earnings Based) cannot be applied to companies without consistent revenue and earnings, GuruFocus developed a valuation model based on normalized Free Cash Flow and Book Value of the company.

The details of how we calculate the intrinsic value of stocks are described in detail here.

This method smooths out the free cash flow over the past 6-7 years, multiplies the results by a growth multiple, and adds a portion of total equity.

Value = ((Growth Multiple)*Free Cash Flow(6 year avg) + 0.8*Total Equity(most recent))/Shares Outstanding

In the case of negative total equity, the following formula is used (see the Total Equity section for the reason):

Value = ((Growth Multiple)*Free Cash Flow(6 year avg) + Total Equity(most recent)/0.8)/Shares Outstanding


Here Watsco Inc's FCF(6 year avg) is calculate as

Watsco Inc Quarterly Data

201412201503201506201509201512201603201606201609201612201703
total_freecashflow 91-20-6916811939-31019730
201206201209201212201303201306201309201312201403201406201409
total_freecashflow -72122106-21-631249523-94103
201106201109201112201203
total_freecashflow -1-201156

Add all the Free Cash Flow together and divide 6 will get Watsco Inc's FCF(6 year avg) = $162.73.

Watsco Inc's Intrinsic Value: Projected FCF for today is calculated as

Intrinsic Value=(Growth Multiple*Free Cash Flow(6 year avg)+Total Equity(Mar17)*0.8)/Shares Outstanding
=(10.3363119506*162.727+978.336*0.8)/32.680
=75.42

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


Explanation

The growth multiple is capped between 8.35 and 17.74.

Total equity weighting is more art than science and it should always be revisited in more detail when researching a company. Weightings from 0% to 100% to more than 100% are possible. 80% was chosen as a happy medium after taking the above ideas into consideration. Learn more here.

Watsco Inc's Price to Intrinsic Value: Projected FCF Ratio for today is calculated as

Price to Intrinsic Value: Projected FCF=Share Price/Intrinsic Value: Projected FCF
=141.33/75.418171199
=1.87

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


Related Terms

Intrinsic Value: DCF (Earnings Based), Intrinsic Value: DCF (FCF Based), Free Cash Flow


Historical Data

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

Watsco Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Projected FCF 47.7844.5442.1347.1756.5268.3773.0274.9281.9682.51

Watsco Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Projected FCF 74.9270.9166.7279.8781.9673.7176.7987.7882.5175.42
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