Transcat (NASDAQ:TRNS – Get Free Report) and Watsco (NYSE:WSO – Get Free Report) are both industrials companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, earnings, analyst recommendations, valuation, profitability, dividends and institutional ownership.
Risk & Volatility
Transcat has a beta of 0.61, suggesting that its stock price is 39% less volatile than the S&P 500. Comparatively, Watsco has a beta of 1.03, suggesting that its stock price is 3% more volatile than the S&P 500.
Valuation and Earnings
This table compares Transcat and Watsco”s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Transcat | $348.40 million | 2.91 | $5.38 million | $0.48 | 225.27 |
| Watsco | $7.24 billion | 1.82 | $496.99 million | $11.32 | 28.19 |
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.
Analyst Ratings
This is a summary of current ratings for Transcat and Watsco, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Transcat | 1 | 1 | 3 | 0 | 2.40 |
| Watsco | 0 | 8 | 2 | 0 | 2.20 |
Transcat currently has a consensus price target of $108.33, suggesting a potential upside of 0.19%. Watsco has a consensus price target of $373.62, suggesting a potential upside of 17.10%. Given Watsco’s higher possible upside, analysts clearly believe Watsco is more favorable than Transcat.
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% | 6.18% | 3.85% |
| Watsco | 6.31% | 13.97% | 9.69% |
Institutional and Insider 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 company insiders. Comparatively, 12.9% of Watsco shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.
Summary
Watsco beats Transcat on 9 of the 14 factors compared between the two stocks.
About Transcat
Transcat, Inc. provides calibration and laboratory instrument services in the United States, Canada, and internationally. It operates through two segments: Service and Distribution. The Service segment offers calibration, repair, inspection, analytical qualification, preventative maintenance, consulting, and other related services. This segment also provides CalTrak, a proprietary document and asset management system that is used to manage the workflow of its calibration service centers and customers’ assets; and Compliance, Control and Cost, an online customer portal that provides its customers with web-based asset management capability, as well as a safe and secure off-site archive of calibration and other service records. The Distribution segment sells and rents test, measurement, and control instruments for customers’ test and measurement instrumentation needs, as well as value added services, such as calibration/certification of equipment purchase, equipment rental, used equipment for sale, and equipment kitting. This segment markets and sells its products through website, digital and print advertising, proactive outbound sales, and an inbound call center. The company provides services and products to highly regulated industries, principally life science, which includes companies in the pharmaceutical, biotechnology, medical device, and other FDA-regulated industries; and additional industries, including aerospace and defense industrial manufacturing, energy and utilities, and other industries that require accuracy in processes and confirmation of the capabilities of their equipment. Transcat, Inc. was incorporated in 1964 and is headquartered in Rochester, New York.
About Watsco
Watsco, Inc., together with its subsidiaries, engages in the distribution of air conditioning, heating, refrigeration equipment, and related parts and supplies in the United States and internationally. The company distributes equipment, including residential ducted and ductless air conditioners, such as gas, electric, and oil furnaces; commercial air conditioning and heating equipment systems; and other specialized equipment. It also offers parts comprising replacement compressors, evaporator coils, motors, and other component parts; and supplies, such as thermostats, insulation materials, refrigerants, ductworks, grills, registers, sheet metals, tools, copper tubing, concrete pads, tapes, adhesives, and other ancillary supplies, as well as plumbing and bathroom remodeling supplies. The company serves contractors and dealers that service the replacement and new construction markets for residential and light commercial central air conditioning, heating, and refrigeration systems. Watsco, Inc. was incorporated in 1956 and is headquartered in Miami, Florida.
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