Should You Be Adding Sherwin

Stock Analysis

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Sherwin-Williams (NYSE:SHW). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for Sherwin-Williams

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Sherwin-Williams managed to grow EPS by 12% per year, over three years. That's a pretty good rate, if the company can sustain it.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Sherwin-Williams maintained stable EBIT margins over the last year, all while growing revenue 11% to US$22b. That's progress.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Sherwin-Williams' forecast profits?

Insider interest in a company always sparks a bit of intrigue and many investors are on the lookout for companies where insiders are putting their money where their mouth is. This view is based on the possibility that stock purchases signal bullishness on behalf of the buyer. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

Although we did see some insider selling (worth US$401k) this was overshadowed by a mountain of buying, totalling US$1.3m in just one year. This bodes well for Sherwin-Williams as it highlights the fact that those who are important to the company having a lot of faith in its future. Zooming in, we can see that the biggest insider purchase was by Chairman & CEO John Morikis for US$519k worth of shares, at about US$260 per share.

Along with the insider buying, another encouraging sign for Sherwin-Williams is that insiders, as a group, have a considerable shareholding. Notably, they have an enviable stake in the company, worth US$169m. This comes in at 0.3% of shares in the company, which is a fair amount of a business of this size. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

As previously touched on, Sherwin-Williams is a growing business, which is encouraging. In addition, insiders have been busy adding to their sizeable holdings in the company. That should do plenty in prompting budding investors to undertake a bit more research - or even adding the company to their watchlists. What about risks? Every company has them, and we've spotted 1 warning sign for Sherwin-Williams you should know about.

Keen growth investors love to see insider buying. Thankfully, Sherwin-Williams isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Find out whether Sherwin-Williams is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

The Sherwin-Williams Company engages in the manufacture, distribution, and sale of paints, coating, and related products to professional, industrial, commercial, and retail customers.

Solid track record average dividend payer.