Watsco (NYSE:WSO) vs. Transcat (NASDAQ:TRNS) Critical Analysis

Transcat (NASDAQ:TRNS) and Watsco (NYSE:WSO) are both industrials companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, risk, profitability, institutional ownership, dividends, earnings and analyst recommendations.

Profitability

This table compares Transcat and Watsco’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Transcat	1.26%	6.14%	3.80%
Watsco	6.31%	13.97%	9.69%

Analyst Recommendations

This is a summary of current ratings for Transcat and Watsco, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Transcat	1	0	3	1	2.80
Watsco	0	8	2	0	2.20

Transcat currently has a consensus target price of $108.33, indicating a potential upside of 0.44%. Watsco has a consensus target price of $373.62, indicating a potential upside of 20.40%. Given Watsco’s higher probable upside, analysts clearly believe Watsco is more favorable than Transcat.

Insider and Institutional Ownership

98.3% of Transcat shares are held by institutional investors. Comparatively, 89.7% of Watsco shares are held by institutional investors. 1.8% of Transcat shares are held by insiders. Comparatively, 12.9% of Watsco shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Transcat and Watsco”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Transcat	$363.22 million	2.79	$5.38 million	$0.48	224.71
Watsco	$7.44 billion	1.72	$496.99 million	$11.32	27.41

Watsco has higher revenue and earnings than Transcat. Watsco is trading at a lower price-to-earnings ratio than Transcat, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Transcat has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500. Comparatively, Watsco has a beta of 1.03, meaning that its share price is 3% more volatile than the S&P 500.

Summary

Watsco beats Transcat on 9 of the 15 factors compared between the two stocks.

About Transcat

Transcat, Inc. provides calibration and related services, including instrument repair, inspection and compliance support. Its services help customers maintain the accuracy and reliability of equipment used in regulated and quality-sensitive operations. The company also distributes professional-grade test, measurement and control instruments from a range of manufacturers. Its offerings include equipment used to measure and monitor variables such as pressure, temperature, electrical signals and humidity.

About Watsco

Watsco, Inc. distributes air-conditioning, heating, and refrigeration equipment and related parts and supplies. Its products serve residential and light commercial applications, including systems used in homes and businesses, as well as components and supplies for contractors who install and maintain them. The company sells products from a range of manufacturers through a network of distribution locations and digital platforms. Watsco serves customers in the United States, Canada, Mexico, and parts of Latin America and the Caribbean, supporting the installation, repair, and replacement of HVAC and refrigeration systems.