Head-To-Head Review: AZEK (NYSE:AZEK) versus Watsco (NYSE:WSO.B)

AZEK (NYSE:AZEK) and Watsco (NYSE:WSO.B) are both construction companies, but which is the superior business? We will compare the two companies based on the strength of their risk, analyst recommendations, valuation, profitability, dividends, earnings and institutional ownership.

Risk and Volatility

AZEK has a beta of 1.82, meaning that its share price is 82% more volatile than the S&P 500. Comparatively, Watsco has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
AZEK	9.92%	13.87%	8.63%
Watsco	6.98%	17.13%	11.86%

Earnings & Valuation

This table compares AZEK and Watsco”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AZEK	$1.44 billion	5.47	$153.38 million	$1.02	53.74
Watsco	$7.62 billion	2.35	$536.29 million	$13.01	33.99

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

Analyst Ratings

This is a summary of recent recommendations and price targets for AZEK and Watsco, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AZEK	0	10	7	0	2.41
Watsco	0	0	0	0	0.00

AZEK currently has a consensus target price of $53.93, suggesting a potential downside of 1.61%. Given AZEK’s stronger consensus rating and higher probable upside, equities research analysts plainly believe AZEK is more favorable than Watsco.

Institutional & Insider Ownership

97.4% of AZEK shares are held by institutional investors. Comparatively, 0.1% of Watsco shares are held by institutional investors. 3.2% of AZEK shares are held by insiders. Comparatively, 13.8% of Watsco shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

AZEK beats Watsco on 8 of the 14 factors compared between the two stocks.

About AZEK

The AZEK Company Inc. engages in the design, manufacturing, and selling of building products for residential, commercial, and industrial markets in the United States and Canada. It operates through two segments: Residential and Commercial. The Residential segment designs and manufactures engineered outdoor living products, such as decking, railing, trim and molding, siding and cladding, pergolas and cabanas, and accessories under the TimberTech, AZEK Exteriors, VERSATEX, ULTRALOX, StruXure, and INTEX brands. The Commercial segment offers bathroom partitions, shower and dressing stalls, lockers and other storage solutions, and engineered plastic sheet products under the Aria, Eclipse, Hiny Hiders, TuffTec, and Duralife brands. This segment also offers bathroom partitions, shower and dressing stalls, lockers, storage solutions, extruded plastic sheet, and non-fabricated products under the Aria, Eclipse, Hiny Hiders, TuffTec, and Duralife brands. The company was formerly known as Delaware corporation and changed its name to The AZEK Company Inc. in June 2020. The AZEK Company Inc. was incorporated in 2013 and is headquartered in Chicago, Illinois.

About Watsco

Watsco, Inc., together with its subsidiaries, distributes air conditioning, heating, and refrigeration equipment; and related parts and supplies in the United States, Canada, Mexico, and Puerto Rico. It offers residential ducted and ductless air conditioners; gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. The company also provides parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation material, refrigerants, ductwork, grills, registers, sheet metal, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies. It serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. In addition, the company exports its products to Latin America and the Caribbean Basin. Watsco, Inc. was founded in 1945 and is headquartered in Miami, Florida.