Today we're going to take a look at the well-established Watsco, Inc. (NYSE:WSO). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$520 and falling to the lows of US$449. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Watsco's current trading price of US$478 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Watsco's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

What Is Watsco Worth?

Watsco appears to be overvalued by 34% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$478 on the market compared to our intrinsic value of $356.30. This means that the opportunity to buy Watsco at a good price has disappeared! Another thing to keep in mind is that Watsco's share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it's there, it may be hard to fall back down into an attractive buying range again.

What kind of growth will Watsco generate?

Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. With profit expected to grow by 47% over the next couple of years, the future seems bright for Watsco. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has well and truly priced in WSO's positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe WSO should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you've been keeping an eye on WSO for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the optimistic prospect is encouraging for WSO, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into Watsco, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Watsco you should know about.

If you are no longer interested in Watsco, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.