- Watsco has benefited from strong demand in residential HVAC, but the pace of that ongoing growth is very much up for debate, with tougher comps and moderating renovation/replacement activity.
- Management has successfully executed on a tuck-in M&A strategy for decades and that isn't stopping.
- Watsco has also been delivering meaningful benefits from a digitalization strategy that increases customer loyalty, reduces operating costs, and gives management useful actionable data.
- High-single-digit FCF growth and solid returns (ROIC, ROTA, et al) aren't enough to support a meaningfully higher fair value today.
For further details see:
Watsco Continues To Execute Very Well, But End-Market Demand And Valuation Are Concerns