On July 25, 2023, Sherwin-Williams Co (SHW, Financial) saw a gain of 4.55% in its stock price, reaching $280.21 per share. This Fortune 500 company boasts a market capitalization of $72.3 billion, with sales figures reaching $22.6 billion. According to the unique GF Value indicator, the stock is fairly valued, with a GF Value of $305.4. This assessment is based on historical trading multiples, an adjustment factor from GuruFocus, and estimates of future business performance.
Sherwin-Williams Co, the largest provider of architectural paint in the United States, operates over 4,900 stores nationwide. Renowned for selling premium paint at higher price points than most competitors, the company also offers paint-related products in big-box stores and provides coatings for original equipment manufacturers.
GF Value: A Fair Valuation of Sherwin-Williams Co (SHW, Financial)
According to the GF Value Line, Sherwin-Williams Co (SHW) appears to be fairly valued. The GF Value, an estimation of the fair value at which the stock should ideally be traded, is calculated based on historical trading multiples, past business growth, and future estimates of the business' performance. The current stock price of Sherwin-Williams Co aligns closely with the GF Value, indicating a fair valuation.
Given this fair valuation, the long-term return of Sherwin-Williams Co's stock is likely to be close to the rate of its business growth.
Financial Strength and Profitability
Investors must carefully review a company’s financial strength before purchasing shares to avoid potential capital loss. Sherwin-Williams Co has a cash-to-debt ratio of 0.01, which ranks lower than 98.79% of companies in the Chemicals industry, indicating a poor balance sheet.
Profitability is another crucial factor for investors. Sherwin-Williams Co has been profitable for the past 10 years, with an operating margin of 13.94%, ranking better than 75.24% of companies in the Chemicals industry. This strong profitability indicates a potentially sound investment.
Growth and Value Creation
Growth is a critical factor in company valuation. Sherwin-Williams Co has an average annual revenue growth of 9.8%, which ranks better than 52.03% of companies in the Chemicals industry. However, its 3-year average EBITDA growth is 9.3%, ranking lower than 52.07% of companies in the same industry.
Another way to evaluate profitability is by comparing the company's return on invested capital (ROIC) to its weighted cost of capital (WACC). Over the past 12 months, Sherwin-Williams Co’s ROIC was 13.55, while its WACC came in at 9.21, indicating value creation for shareholders.
Conclusion
In conclusion, Sherwin-Williams Co (SHW, Financial) appears to be fairly valued, with strong profitability despite its poor financial condition. For more information on Sherwin-Williams Co's financials, check out its 30-Year Financials here.
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