uploads///Part  Valuations

Sherwin-Williams’s Valuation Compared to Its Peers


Oct. 1 2018, Updated 9:00 a.m. ET

Sherwin-Williams’s forward PE multiple

Previously, we discussed Sherwin-Williams’s (SHW) stock performance in 2018. In this part, we’ll compare Sherwin-Williams’s valuation with its peers. As of September 25, Sherwin-Williams’s one-year forward PE multiple was at 21.50x. PPG Industries (PPG) and RPM International (RPM) have one-year forward PE multiples of 16.4x and 20.10x, respectively.

A forward PE multiple considers future earnings. Investors can use forward PE multiples to compare two or more companies operating in the same industry to see which companies are overvalued and undervalued.

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Is Sherwin Williams overvalued?

Sherwin-Williams’s stock price rose after its strong second-quarter earnings and the upward revision to the adjusted EPS guidance. Analysts expect Sherwin-Williams’s adjusted EPS for the next four quarters to be ~$20.84, which implies an increase of 21.10% over the previous year. The growth is expected to be driven by the continued synergy gains from the Valspar acquisition. Organic growth will likely contribute to Sherwin-Williams’s earnings growth.

PPG Industries and RPM International’s adjusted EPS growth for the next four quarters is projected to be $3.16 and $6.58, respectively, which represents 12.5% and 9.7% growth. Sherwin-Williams’s adjusted EPS growth is higher than its peers. As a result, Sherwin-Williams commands a premium over its peers.

Investors could hold Sherwin-Williams indirectly by investing in the Invesco DWA Momentum ETF (PDP). PDP has invested 1.9% of its portfolio in Sherwin-Williams. The fund also provides exposure to Ansys (ANSS) with a weight of 2.0% as of September.


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