Is Watsco, Inc. overvalued or undervalued?

As of 7 July 2025, Watsco, Inc. has moved from a fair to a very expensive valuation grade. The company appears to be overvalued, given its elevated valuation ratios, including a P/E ratio of 34, a price to book value of 7.49, and an EV to EBITDA of 25.34. In comparison, peers such as Otis Worldwide Corp. have a P/E of 21.12 and EV to EBITDA of 19.78, highlighting the premium Watsco commands in the market.
Additionally, Watsco's recent stock performance has been underwhelming, with a year-to-date return of -18.92%, significantly lagging behind the S&P 500's return of 12.22% during the same period. This trend, combined with its high valuation metrics, reinforces the conclusion that Watsco, Inc. is currently overvalued.