Watsco (NYSE:WSO – Get Free Report) and Ferguson (NASDAQ:FERG – Get Free Report) are both large-cap construction companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, institutional ownership, profitability, risk, valuation and earnings.
Volatility & Risk
Watsco has a beta of 0.89, suggesting that its stock price is 11% less volatile than the S&P 500. Comparatively, Ferguson has a beta of 1.15, suggesting that its stock price is 15% more volatile than the S&P 500.
Institutional & Insider Ownership
89.5% of Watsco shares are owned by institutional investors. 13.3% of Watsco shares are owned by insiders. Comparatively, 0.2% of Ferguson shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Watsco currently has a consensus target price of $373.78, indicating a potential downside of 4.22%. Ferguson has a consensus target price of $164.20, indicating a potential downside of 0.97%. Given Ferguson’s stronger consensus rating and higher probable upside, analysts clearly believe Ferguson is more favorable than Watsco.
This table compares Watsco and Ferguson’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Watsco pays an annual dividend of $9.80 per share and has a dividend yield of 2.5%. Ferguson pays an annual dividend of $3.00 per share and has a dividend yield of 1.8%. 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. Watsco has increased its dividend for 10 consecutive years. Watsco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Earnings and Valuation
This table compares Watsco and Ferguson’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Watsco||$7.27 billion||2.11||$601.17 million||$15.15||25.76|
|Ferguson||$29.73 billion||1.14||$1.89 billion||$9.12||18.18|
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.
Watsco beats Ferguson on 9 of the 17 factors compared between the two stocks.
Watsco, Inc., together with its subsidiaries, engages in the distribution of air conditioning, heating, refrigeration equipment, and related parts and supplies. The company distributes equipment, including residential ducted and ductless air conditioners, such as gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also offers parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation materials, refrigerants, ductworks, grills, registers, sheet metals, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies, as well as plumbing and bathroom remodeling supplies. The company serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. It operates in the United States, Canada, Mexico, and Puerto Rico, as well as 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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