Watsco Inc (WSO)
Return on total capital
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 745,047 | 717,407 | 734,215 | 740,932 | 785,377 | 815,612 | 795,248 | 816,640 | 822,867 | 810,847 | 781,393 | 711,079 | 625,632 | 573,678 | 523,660 | 436,126 | 399,489 | 381,354 | 349,892 | 355,043 |
| Long-term debt | US$ in thousands | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Total stockholders’ equity | US$ in thousands | 4,479,520 | 2,696,380 | 2,610,840 | 2,526,420 | 2,229,840 | 2,224,010 | 2,037,650 | 1,928,870 | 1,889,240 | 1,908,780 | 1,834,440 | 1,725,210 | 1,664,950 | 1,644,580 | 1,575,700 | 1,491,410 | 1,486,680 | 1,489,610 | 1,437,040 | 1,404,340 |
| Return on total capital | 16.63% | 26.61% | 28.12% | 29.33% | 35.22% | 36.67% | 39.03% | 42.34% | 43.56% | 42.48% | 42.60% | 41.22% | 37.58% | 34.88% | 33.23% | 29.24% | 26.87% | 25.60% | 24.35% | 25.28% |
December 31, 2024 calculation
Return on total capital = EBIT (ttm) ÷ (Long-term debt + Total stockholders’ equity)
= $745,047K ÷ ($—K + $4,479,520K)
= 16.63%
Watsco Inc's return on total capital has shown a generally increasing trend over the past few years, indicating the company's ability to generate profits from its capital investments. The ratio increased steadily from 25.28% as of March 31, 2020, reaching a peak of 43.56% as of December 31, 2022. However, there was a subsequent decline in the ratio to 16.63% by the end of December 31, 2024.
The peak in the return on total capital suggests that Watsco Inc was efficiently utilizing its total capital to generate returns for shareholders. However, the significant decline by the end of 2024 may indicate a decrease in profitability or potentially inefficient capital allocation during that period.
It is important for investors and stakeholders to monitor the return on total capital closely to assess the company's financial performance and efficiency in utilizing its capital resources effectively. Further analysis and investigation may be needed to understand the factors contributing to the fluctuations in the return on total capital ratio.