Watsco (NYSE:WSO) and Karat Packaging (NASDAQ:KRT) Head to Head Comparison

Watsco (NYSE:WSO) and Karat Packaging (NASDAQ:KRT) are both industrials companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, analyst recommendations, risk, institutional ownership, dividends, valuation and earnings.

Insider and Institutional Ownership

89.7% of Watsco shares are held by institutional investors. Comparatively, 25.2% of Karat Packaging shares are held by institutional investors. 12.9% of Watsco shares are held by company insiders. Comparatively, 57.9% of Karat Packaging shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

Watsco pays an annual dividend of $13.20 per share and has a dividend yield of 4.2%. Karat Packaging pays an annual dividend of $1.80 per share and has a dividend yield of 3.8%. Watsco pays out 114.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Karat Packaging pays out 72.0% of its earnings in the form of a dividend. Watsco has raised its dividend for 13 consecutive years and Karat Packaging has raised its dividend for 2 consecutive years. Watsco is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Watsco	$7.24 billion	1.76	$496.99 million	$11.53	27.12
Karat Packaging	$467.74 million	2.04	$31.48 million	$2.50	19.16

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

Volatility & Risk

Watsco has a beta of 1.05, suggesting that its share price is 5% more volatile than the S&P 500. Comparatively, Karat Packaging has a beta of 0.82, suggesting that its share price is 18% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Watsco	6.53%	14.40%	10.17%
Karat Packaging	10.18%	30.62%	16.67%

Analyst Recommendations

This is a breakdown of current ratings and price targets for Watsco and Karat Packaging, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Watsco	0	9	2	0	2.18
Karat Packaging	1	2	3	0	2.33

Watsco presently has a consensus price target of $395.50, indicating a potential upside of 26.50%. Karat Packaging has a consensus price target of $36.50, indicating a potential downside of 23.82%. Given Watsco’s higher possible upside, equities analysts plainly believe Watsco is more favorable than Karat Packaging.

Summary

Watsco beats Karat Packaging on 9 of the 17 factors compared between the two stocks.

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.

About Karat Packaging

Karat Packaging Inc., together with its subsidiaries, engages in the manufacture and distribution of single-use disposable products in plastic, paper, biopolymer-based, and other compostable forms used in various restaurant and foodservice settings. It provides food and take-out containers, bags, tableware, cups, lids, cutlery, straws, specialty beverage ingredients, equipment, gloves, and other products under the Karat Earth brand. The company also provides new product development, design, printing, and logistics services. It offers its products to national and regional distributors, restaurant chains, retail establishments, and online customers. The company was founded in 2000 and is based in Chino, California.