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Dr. Charlie Tian is the founder and CEO of GuruFocus.com, a leading global investment research platform established in 2004. With a Ph.D. in physics, Dr. Tian transitioned from science to finance, applying a data-driven, disciplined approach to value investing.
GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is rated on a scale of 1 to 10 and is based on these factors:
1. The debt burden that the company has as measured by its Interest Coverage (current year). The higher, the better.
2. Debt to revenue ratio. The lower, the better.
3. Altman Z-Score.
4. Other debt related ratios.
A higher score indicates a stronger financial position, with companies rated 7 or above considered financially stable and unlikely to face distress. Conversely, a score of 3 or below suggests potential financial difficulties, indicating a higher risk of distress.
Watsco did not have earnings to cover the interest expense.
Watsco's debt to revenue ratio for the quarter that ended in Jun. 2026 was 0.06.
As of today, Watsco's Altman Z-Score is 7.63.
The rank is rated on a scale of 1 to 10. A higher score indicates a stronger financial position, with companies rated 7 or above considered financially stable and unlikely to face distress. Conversely, a score of 3 or below suggests potential financial difficulties, indicating a higher risk of distress.
Watsco has the Financial Strength Rank of 7.
Watsco Financial Strength Related Terms
WSO vs AIT, QXO, WCC: Financial Strength Comparison
For the Industrial Distribution subindustry, Watsco's Financial Strength, along with its competitors' market caps and Financial Strength data, can be viewed below:
* 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. Note that "N/A" values will not show up in the chart.
Watsco Financial Strength vs Industrial Distribution Industry
For the Industrial Distribution industry and Industrials sector, Watsco's Financial Strength distribution charts can be found below:
* The bar in red indicates where Watsco's Financial Strength falls into.
Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income (EBIT) by its Interest Expense:
Z-Score model is an accurate forecaster of failure up to two years prior to distress. It can be considered the assessment of the distress of industrial corporations.
The zones of discrimination were as such:
When Z-Score is less than 1.81, it is in Distress Zones.
When Z-Score is greater than 2.99, it is in Safe Zones.
When Z-Score is between 1.81 and 2.99, it is in Grey Zones.
Watsco has a Z-score of 7.63, indicating it is in Safe Zones. This implies the Z-Score is strong.
Good Sign:
Altman Z-score of 7.63 is strong.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Watsco (WSO) has a Financial Strength of 7 as of Jun. 2026. The financial strength rank measures the strength of a company's balance sheet based on revenue and debt. View historical data on Watsco and its competitors. This is 13% below median its historical median of 8.00. Over the past decade, Watsco's Financial Strength has ranged from 7.00 to 9.00.
Is Watsco's Financial Strength too high?
Watsco's current Financial Strength of 7 is 13% below median its 10-year median of 8.00. Over the past 10 years, this metric has ranged from a low of 7.00 to a high of 9.00. Overall, Watsco has a GF Score™ of 83/100 and is considered Modestly Undervalued, reflecting its overall financial health beyond just this single metric.
How does Watsco's Financial Strength compare to AIT and QXO?
Watsco's Financial Strength of 7 can be compared against companies in the Industrial Distribution industry. Historically, Watsco's own Financial Strength has ranged from 7.00 to 9.00 over the past decade. See the competitive comparison table and distribution chart on this page for a detailed peer-by-peer breakdown.
What is a good Financial Strength for an Industrial Distribution company?
A good Financial Strength depends on the Industrial Distribution industry context. However, Financial Strength should not be evaluated in isolation — investors should consider it alongside profitability, growth, and financial strength metrics. Use the industry distribution chart on this page to see where any company falls relative to its peers.
What does a high Financial Strength mean?
A high Financial Strength can signal that a stock is expensive relative to its fundamentals. The financial strength rank measures the strength of a company's balance sheet based on revenue and debt. View historical data on Watsco and its competitors. Watsco's current Financial Strength is 7, which is 13% below median its own 10-year median of 8.00. However, context matters — high-growth companies often justify higher valuations. Always evaluate alongside other metrics like GF Score™ and GF Value™.
Is Watsco stock overvalued right now?
Based on GuruFocus' analysis, Watsco (WSO) is currently considered Modestly Undervalued. The stock's GF Value™ is $416.23, compared to a current price of $311.77 — trading 25.1% below its estimated fair value. The current Financial Strength is 7, which is 13% below median its 10-year median of 8.00. Watsco's overall GF Score™ is 83/100 with 3 warning signs to review. Investors should evaluate multiple metrics — including profitability, growth, and financial strength — before making a decision.
How is Financial Strength calculated?
Financial Strength is calculated from a company's financial statements. For Watsco (WSO), the current Financial Strength is 7 as of Jun. 2026. GuruFocus calculates this using data sourced from SEC filings and annual reports. See the calculation section and 30-year financial data on this page for the full breakdown.
Is Watsco (WSO) Overvalued in 2026?
Based on GuruFocus' analysis, Watsco stock appears to be undervalued.
The current stock price of $311.77 is trading 25.1% below its estimated GF Value™ of $416.23.
GuruFocus considers Watsco to be Modestly Undervalued.
Key valuation signals for WSO:
Financial Strength: 7 (13% below median its 10-year median of 8.00)
GF Value™: $416.23 vs. price of $311.77 (25.1% below fair value)
No single metric tells the full story. See the WSO stock analysis page for a complete view including 30-year financials, guru trades, and insider activity.
Watsco is the largest HVAC and refrigeration products distributor in North America with approximately 13% market share. The company primarily operates in the United States (90% of revenue) with significant exposure in the Sunbelt states. Watsco also has operations in Canada, Latin America, and the Caribbean. The company's customer base comprises more than 120,000 dealers and contractors serving the replacement and new-construction HVAC/R markets for residential and light-commercial applications. As much as 20% of residential HVAC units are distributed through Watsco in any given year. Revenue is approximately 75%-80% residential HVAC and 20%-25% commercial, with relatively small exposure to more complex "applied" solutions.
83GF Score
Get the complete analysis for WSO
Financial Strength is just one metric. See GF Value™, 30-year financials, guru trades, warning signs, and more.
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