PPG Industries Inc (PPG)

Conclusion

PPG Industries makes paints, coatings and specialty materials for architectural, performance and industrial customers, and is headquartered in Pittsburgh. At a price of 125.31 USD on 2026-11-09, its market capitalisation is 27.68 billion USD and its enterprise value is 33.50 billion USD.

The verdict is fair. Today's multiples sit below their ten-year medians: the P/E is 17.6x against a median of 24.8x, and the EV/EBITDA is 11.7x against 15.1x. The DCF gives 79.26 USD per share at a discount rate of 9.83%. The fair value band runs from 99.12 to 148.68 USD with a midpoint of 123.90 USD, giving a margin of safety of -1.1% at the current price. The reverse DCF implies growth of 8.9% a year, against revenue growth of 2.8% a year over five years and free cash flow per share growth of -7.8% a year over the same period. The price therefore assumes more growth than the company has delivered.

The strongest supports are ROIC of 12.6% against a WACC of 8.6%, an Altman Z-score of 3.90 and a Beneish M-score of -2.42. The weakest numbers are net debt to EBITDA of 2.04, revenue growth of 0.6% a year over three years, and a 90-day change of -0.3% in the next-year EPS estimate, with eight downward revisions in the last 30 days.

Financial health

Financial strength is green, supported by the Altman Z-score of 3.90, interest coverage of 9.0x and a current ratio of 1.58, while net debt to EBITDA of 2.04 is neutral. The quick ratio is 1.05 and debt to equity is 0.88. The Altman zone is safe. The Altman model was designed for manufacturers, and PPG is one. Insolvency risk is low, about 0.6% by the estimate of the Ohlson model over one to two years. Net debt has risen modestly relative to earnings, but the company covers its interest costs comfortably and holds liquidity above its current liabilities. The balance sheet gives management room to absorb a weaker period without strain.

Earnings quality

Earnings quality is green. Free cash flow conversion is 81.5% on a trailing basis and 83.9% over five years, and the accrual ratio of -1.8% shows cash backing reported profits. Stock-based compensation is 0.3% of revenue, and free cash flow after it is 1.23 billion USD. The share count fell at a compound rate of 0.9% over five years, which reflects buybacks. The Piotroski score is 6 out of 9, and the Beneish M-score of -2.42 reads as unlikely manipulation. Over the last eight quarters the company beat estimates four times and missed three times, with an average surprise of 1.3%. Analysts have been cutting current-year estimates, with seven downgrades against two upgrades in the last 30 days, so forward earnings momentum is a concern.

Profitability

Profitability is green. The gross margin is 40.1% against a ten-year median of 41.5%, the operating margin is 13.5% against 12.7%, and the net margin is 9.4% against 8.0%. Margins are therefore at or above their medians. ROIC is 12.6% against a WACC of 8.6%, and the given spread is 4.0%, so the company earns more than its cost of capital. Five-year median ROIC is 12.4%. ROE of 18.5% looks high, but the DuPont split shows that a net margin of 9.9%, an asset turnover of 0.72 and an equity multiplier of 2.78 drive it. Leverage contributes meaningfully to the return on equity, so ROIC is the more reliable measure of quality.

Growth

Growth is green, driven mainly by earnings per share rather than sales. Revenue compound growth is 0.6% over three years, 2.8% over five years and 1.1% over ten years. Earnings per share compound at 17.1% over three years, 9.3% over five years and 3.1% over ten years, helped by margin recovery and share count reduction. Free cash flow per share grew 39.8% over three years but fell 7.8% over five years and rose only 0.3% over ten. Revenue grew in six of the last ten years. The company's top line is growing slowly, so the reported earnings growth depends on margin gains and buybacks being sustained.

Valuation

Valuation is yellow, because the multiples are below their history but the neutral verdict on the margin of safety of -1.1% sets the overall tone. The P/E is 17.6x against a ten-year median of 24.8x, a premium of -28.9%. EV/EBITDA is 11.7x against 15.1x (-22.2%), P/FCF is 21.6x against 25.2x (-14.2%), P/S is 1.7x against 1.9x (-14.3%) and P/B is 3.3x against 5.4x (-39.4%). The DCF gives 79.26 USD per share at a discount rate of 9.83%, with the terminal value accounting for 50.3% of it. The fair value from historical multiples is 168.55 USD. The fair value band is an order-of-magnitude estimate built on fixed assumptions, not a price target. The reverse DCF implies 8.9% growth, against 2.8% revenue growth over five years. The dividend yield is 2.3%, and the dividend is 50.2% of free cash flow.

Risks

The main risk is that growth stays slow. Revenue growth of 0.6% over three years and a five-year free cash flow per share decline of 7.8% leave little room for the 8.9% growth the price implies. Net debt to EBITDA of 2.04 would become a stronger constraint if earnings fell, and the falling EPS estimates would test the margin gains that have supported reported earnings. Weaker margins would also reduce ROIC, which now exceeds WACC by 4.0%. The analysis does not cover a debt maturity schedule or revenue by segment, so refinancing risk and the performance of individual divisions cannot be assessed. The DCF and historical fair value are sensitive to the fixed assumptions used, so they indicate order of magnitude only.