Sherwin-Williams (SHW) stock has been firing on all cylinders for decades, making it one of the best non-tech performers in the United States. It has jumped from about $4.68 in 2000 to almost $400 today. This rally means that $10,000 invested in the company at the turn of the millennium would be worth over $800,000 today.
All-weather company
The Sherwin-Williams is one of the top all-weather companies in the US. Other names in this category are companies like Walmart, Visa, Mastercard, ICE, and NASDAQ.
Established in 1884, it has grown to become the biggest paint company in the world. In this period, it has survived the biggest shocks globally like the First and Second World Wars, the Cold War, the Covid-19 pandemic, and Trump’s trade wars.
Sherwin-Williams owns some of the top brands in the paint industry. In addition to the eponymous brand, it owns other firms like Valspar, Minwax, Purdy, Krylon, Ronsel, and Dutch Boy.
The company does well regardless of the market cycle because of its strong brands and market share in the US. It has a bigger share than other firms like PPG, Axalta Coating, and RPM International.
It also does well because its paints group has almost 4,700 specialty stores in the US, Canada, and the Caribbean. These stores are important, because, unlike other products, customers prefer to buy paint in person instead of online.
Its other businesses are its consumer brands and performance coatings. Consumer brands include items like stains, varnishes, wood finishes, and aerosols.
Sherwin-Williams makes most of its money in its paint stores group followed by the performance coatings and consumer brands. In 2023, the two businesses brought in $12.8 billion, $6.8 billion, and $3.3 billion, respectively.
A stable and growing company
The Sherwin-Williams is a stable and growing company. Data shows that its revenue grew from $17.9 billion in 2019 to over $18.3 billion in 2020 even as the COVID-19 pandemic happened.
Historical data shows that 2009 was the only year when its annual revenues dropped because of the Global Financial Crisis, which had an impact on the housing sector.
Its revenue dropped from $7.98 billion in 2008 to $7.09 billion in 2009 and then bounced back to $7.78 billion in 2010.
This revenue growth is impressive because it has avoided making large acquisitions in the last decade. The only major buyout was Valspar in 2017 for over $11.3 billion.
The most recent results showed that The Sherwin-Williams business continued doing well in the second quarter as its revenue rose from $6.24 billion to $6.27 billion. Its net income per share rose to $3.50.
Most importantly, the company continued returning funds to shareholders through dividends and share repurchases. It spent $613 million doing this, an increase of 57% from the same period a year ago.
These share repurchases have helped to reduce its outstanding shares from over 281 million in 2018 to 252 million today. This trend will continue as the company continues generating substantial sums of money and as supply chain issues ease.
Sherwin-Williams is a potential dividend king since it has boosted its dividends for 45 years. A dividend king is a firm that has grown its payouts for over 50 years.
SHW has an extremely low payout ratio of 24.6% and a five-year compounded growth rate of 14.20%.
Valuation and growth
The next important catalyst for the Sherwin-Williams stock will be its earnings, which are scheduled for October 22.
Analysts expect that its results will demonstrate that the firm continued growing in the third quarter. The revenue forecast is $6.2 billion, a 1.4% growth rate from the same period last year.
For the year, analysts expect that its revenue will be $22.23 billion, a 0.80% increase from 2023. It will then grow to over $24.26 billion next year.
Therefore, the key concern is its hefty valuation considering that it is no longer growing as it used to before. It has a forward P/E ratio of 36 and a trailing multiple of 39. These numbers mean that the company needs to continue doing well.
Sherwin-Williams stock analysis
SHW chart by TradingView
The weekly chart shows that the Sherwin-Williams share price has been in a strong rally for a long time.
It recently jumped above the key resistance point at $344, its highest point in March this year and December 2021.
The Relative Strength Index (RSI) and the Stochastic Oscillator have moved to the overbought level. This is a sign that it has momentum.
Therefore, while the stock may continue rising, there are rising odds that it may first drop and retest the support at $343. This is known as a break and retest pattern and is usually a continuation sign.
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