Core Insights - Watsco, Inc. is a leading player in the North American HVAC market, with a strong financial foundation of over $640 million in cash and investments and no debt [1] - The company reported earnings per share (EPS) of $3.98 for Q3 2025, missing the estimated $4.44, which represents a 5.46% negative surprise [2] - Watsco's revenue for the same quarter was $2.07 billion, falling short of the estimated $2.17 billion, marking a 2.21% miss [3] Financial Performance - The EPS decreased from $4.22 in the same quarter last year, indicating a challenging period for the company [2] - Revenue declined from $2.16 billion reported in the same period last year [3] - Watsco has only surpassed consensus revenue estimates once in the last four quarters [3] Market Position and Valuation - Despite the earnings and revenue shortfalls, Watsco maintains a strong market position with a price-to-earnings (P/E) ratio of 26.52 and a price-to-sales ratio of 2.01 [4][6] - The company's enterprise value to sales ratio is also 2.01, indicating stable valuation relative to its sales [4] - Watsco's low debt-to-equity ratio of 0.10 and a robust current ratio of 3.84 further underscore its financial health [4][6] Cash Flow and Returns - Watsco's ability to generate cash flow is reflected in its enterprise value to operating cash flow ratio of 27.23 [5] - The company's earnings yield stands at 3.77%, providing insight into the return on investment [5] - Watsco has achieved an 18% compounded annual total-shareholder return since 1989, driven by strategic acquisitions and organic growth [5]