Critical Analysis: Thermon Group Holdings (THR) versus Watsco (WSO)
Thermon Group Holdings (NYSE: THR) and Watsco (NYSE:WSO) are both computer and technology companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, profitability, valuation, risk, institutional ownership and earnings.
Insider & Institutional Ownership
79.6% of Watsco shares are held by institutional investors. 1.2% of Thermon Group Holdings shares are held by insiders. Comparatively, 13.9% of Watsco shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
Valuation & Earnings
This table compares Thermon Group Holdings and Watsco’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Thermon Group Holdings||$252.47 million||2.07||$37.57 million||$0.38||42.37|
|Watsco||$4.30 billion||1.10||$376.63 million||$5.37||27.05|
Watsco has higher revenue and earnings than Thermon Group Holdings. Watsco is trading at a lower price-to-earnings ratio than Thermon Group Holdings, indicating that it is currently the more affordable of the two stocks.
This table compares Thermon Group Holdings and Watsco’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Thermon Group Holdings||4.99%||3.88%||2.67%|
Risk & Volatility
Thermon Group Holdings has a beta of 0.98, suggesting that its stock price is 2% less volatile than the S&P 500. Comparatively, Watsco has a beta of 0.83, suggesting that its stock price is 17% less volatile than the S&P 500.
Watsco pays an annual dividend of $5.00 per share and has a dividend yield of 3.4%. Thermon Group Holdings does not pay a dividend. Watsco pays out 93.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Thermon Group Holdings has raised its dividend for 3 consecutive years.
This is a summary of recent recommendations and price targets for Thermon Group Holdings and Watsco, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Thermon Group Holdings||1||0||2||0||2.33|
Thermon Group Holdings presently has a consensus price target of $21.50, indicating a potential upside of 33.54%. Watsco has a consensus price target of $161.75, indicating a potential upside of 11.35%. Given Thermon Group Holdings’ higher probable upside, analysts clearly believe Thermon Group Holdings is more favorable than Watsco.
Watsco beats Thermon Group Holdings on 9 of the 16 factors compared between the two stocks.
Thermon Group Holdings Company Profile
Thermon Group Holdings, Inc. is a provider of engineered thermal solutions for process industries. The Company operates through four segments based on four geographic countries or regions: United States, Canada, Europe and Asia. Its product portfolio includes self-regulating and power limiting heating cables, which change heat output as pipe temperature changes, as well as constant wattage heating cables; mineral insulated (MI) cable; skin effect trace heater; heat traced tube bundles for environmental gas sampling systems; heat transfer compounds and steam tracers for steam tracing solutions; control and monitoring systems for electric tracing of pipes, tanks, hoppers and instrument sampling systems; turnkey solutions that provide solutions for heat tracing, including design, optimization, installation and ongoing maintenance; products and services, such as heating, sensing, monitoring, controlling and calibration tools, and temporary electric power distribution and lighting products.
Watsco Company Profile
Watsco, Inc. is a distributor of air conditioning, heating and refrigeration equipment, and related parts and supplies (HVAC/R) in the HVAC/R distribution industry in North America. As of December 31, 2016, the Company sold a range of non-equipment products, representing more than 300,000 stock keeping units, including parts, ductwork, air movement products, insulation, tools, installation supplies, thermostats and air quality products. It distributes products consisting of equipment, including residential ducted and ductless air conditioners ranging from 1 to 5 tons, gas, electric and oil furnaces ranging from 50,000 to 150,000 British Thermal Units, commercial air conditioning and heating equipment and systems ranging from 1.5 to 25 tons and other specialized equipment; parts, including replacement compressors and motors, and supplies, including ductwork, grills, registers, sheet metal, adhesives and other ancillary supplies. It also sells products to the refrigeration market.
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