Watsco (NYSE:WSO.B – Get Free Report) and Ferguson (NASDAQ:FERG – Get Free Report) are both large-cap construction companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, dividends, earnings, profitability and risk.
Volatility and Risk
Watsco has a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500. Comparatively, Ferguson has a beta of 1.15, indicating that its share price is 15% more volatile than the S&P 500.
This table compares Watsco and Ferguson’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Valuation and Earnings
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Watsco||$7.27 billion||2.01||$601.17 million||$15.15||24.75|
|Ferguson||$29.73 billion||1.07||$1.89 billion||$9.12||17.10|
Ferguson has higher revenue and earnings than Watsco. Ferguson is trading at a lower price-to-earnings ratio than Watsco, indicating that it is currently the more affordable of the two stocks.
This is a breakdown of recent recommendations for Watsco and Ferguson, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Ferguson has a consensus price target of $164.20, suggesting a potential upside of 5.27%. Given Ferguson’s higher probable upside, analysts clearly believe Ferguson is more favorable than Watsco.
Watsco pays an annual dividend of $9.80 per share and has a dividend yield of 2.6%. Ferguson pays an annual dividend of $3.00 per share and has a dividend yield of 1.9%. Watsco pays out 64.7% of its earnings in the form of a dividend. Ferguson pays out 32.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.
Insider and Institutional Ownership
0.1% of Watsco shares are owned by institutional investors. 13.8% of Watsco shares are owned by company insiders. Comparatively, 0.1% of Ferguson shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.
Watsco beats Ferguson on 8 of the 15 factors compared between the two stocks.
Watsco, Inc., together with its subsidiaries, distributes air conditioning, heating, and refrigeration equipment; and related parts and supplies in the United States, Canada, Mexico, and Puerto Rico. It offers residential ducted and ductless air conditioners; gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. The company also provides parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation material, refrigerants, ductwork, grills, registers, sheet metal, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies. It serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. In addition, the company exports its products to Latin America and the Caribbean Basin. Watsco, Inc. was founded in 1945 and is headquartered in Miami, Florida.
Ferguson plc distributes plumbing and heating products in the United States and Canada. It offers plumbing and heating solutions to customers in the residential, commercial, civil/infrastructure, and industrial end markets. The company also provides expertise, solutions, and products, including infrastructure, plumbing, appliances, fire, fabrication, and others, as well as heating, ventilation, and air conditioning products under the Ferguson brand name. In addition, it supplies pipes, valves, fittings, plumbing supplies, water and wastewater treatment products, and refrigeration products under Wolseley brand name. Further, the company provides after-sales support comprising warranty, credit, project-based billing, returns, maintenance, repair, and operations support. It sells its products through wholesale distributors, supply houses, retail enterprises, and online. Ferguson plc was founded in 1953 and is headquartered in Wokingham, the United Kingdom.
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