SHERWIN-WILLIAMS CO/THE (NYSE:SHW) – A Quality Stock with Strong Fundamentals

SHERWIN-WILLIAMS CO/THE (NYSE:SHW) was identified by our Caviar Cruise stock screener as a potential candidate for quality investors. The company demonstrates strong profitability, consistent growth, and efficient capital allocation, making it worth a closer look for long-term investors.

Key Strengths

• High Return on Invested Capital (ROIC) – SHW has an impressive ROIC (excluding cash and goodwill) of 40.91%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Strong EBIT Growth – The company’s EBIT has grown at a 9.18% annual rate over the past five years, outpacing its revenue growth of 4.46%, suggesting improving profitability.
• Healthy Debt Management – With a Debt-to-Free Cash Flow ratio of 4.95, SHW can repay its debt in under five years using current cash flows, a sign of financial stability.
• High Profit Quality – SHW converts nearly 101% of its net income into free cash flow, indicating strong earnings quality and reliable cash generation.

Fundamental Analysis Summary

Our fundamental report assigns SHW a rating of 6 out of 10, highlighting its strong profitability but noting some concerns about valuation and liquidity. Key takeaways:

• Profitability: SHW scores highly with industry-leading margins (Operating Margin: 16.45%, Profit Margin: 11.63%) and outstanding returns (ROE: 64.89%).
• Growth: Revenue and earnings have grown steadily, with analysts expecting continued EPS growth of 8.32% annually.
• Valuation: The stock trades at a P/E of 30.19, which is above the industry average, reflecting its premium positioning.
• Financial Health: While SHW has manageable debt, its liquidity ratios (Current Ratio: 0.77) are below industry standards.

For investors seeking stable, high-quality businesses, SHW stands out due to its strong fundamentals and consistent performance.

Our Caviar Cruise screener lists more quality stocks and is updated daily.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own analysis before making investment decisions.