Sherwin-Williams Co (SHW)

Conclusion

Sherwin-Williams develops, manufactures and sells paint, coatings and related products to professional, industrial, commercial and retail customers across three segments, with operations in North America, South America, Europe, Asia and Australia. On 2026-11-09 the share price was 357.93 USD, giving a market capitalisation of 86.5 billion USD and an enterprise value of 100.2 billion USD.

The verdict is overvalued. The fair value band runs from 231.24 to 346.87 USD with a midpoint of 289.06 USD, a margin of safety of -19.2% at the current price. Today's P/E of 32.3 is close to its ten-year median of 33.0, and EV/EBITDA of 21.8 is close to its median of 22.0, so the earnings multiples are not stretched against history. The DCF gives 217.47 USD per share at a discount rate of 10.1%, while the fair value from historical multiples is 360.64 USD. The reverse DCF implies growth of 13.2% a year, against revenue growth of 5.1% a year over five years and free cash flow per share growth of -1.2% a year over the same period.

The strongest supports are ROIC of 17.5% against a WACC of 9.3%, an operating margin of 16.2% against a ten-year median of 14.0%, and free cash flow conversion of 115.0% over the last twelve months. The weakest numbers are a current ratio of 0.71, net debt to EBITDA of 2.99, and a price-to-book ratio of 21.7 against a median of 18.5. Analyst estimates are also moving down: next-year EPS estimates have fallen 2.8% over 90 days, with eight downgrades and no upgrades in the last 30 days.

Financial health

Financial strength is yellow: the Altman Z-score of 3.69 (safe zone) supports it, while a current ratio of 0.71 pulls it down. Net debt to EBITDA of 2.99 and interest coverage of 7.49 are neutral. The quick ratio is 0.39 and debt to equity is 3.52. The Altman model was designed for manufacturers, and Sherwin-Williams is one, so it applies directly. Insolvency risk: low, about 2.4% by the estimate of the Ohlson model over one to two years. The company's balance sheet is leveraged but its interest costs are covered about 7.5 times on a trailing basis, so the main concern is short-term liquidity rather than long-term solvency.

Earnings quality

Earnings quality is green, supported by free cash flow conversion of 115.0% over the trailing twelve months and 91.3% on a five-year basis, and by a share count that fell 1.9% a year over five years, which points to buybacks. The accrual ratio is -3.6%, which means cash earnings exceed reported earnings. Stock-based compensation is 0.5% of revenue, and free cash flow after it is 2.96 billion USD. The Piotroski score is 6 out of 9. The Beneish M-score is not available. The company beat earnings estimates in six of the last eight quarters, with an average surprise of 1.1%. Revisions are the weak point: the current-year estimate is down 0.3% over 90 days, and the next-year estimate is down 2.8%.

Profitability

Profitability is green. The gross margin of 48.7% is above its ten-year median of 45.8%, the operating margin of 16.2% is above 14.0%, and the net margin of 10.7% is above 10.0%. Operating margin stability is 13.2%. ROIC of 17.5% sits against a WACC of 9.3%, and the given ROIC minus WACC value is 8.3%, which the company achieves in a sustained way: the five-year median ROIC is 16.9%. Return on equity is 67.3%, but the DuPont split shows that this is mainly leverage: a net margin of 10.9%, an asset turnover of 0.91 and an equity multiplier of 5.63. Return on equity therefore overstates the underlying economics, and ROIC is the more reliable measure.

Growth

Growth is green, though the rates are moderate. Revenue compounded at 2.1% over three years, 5.1% over five years and 7.6% over ten years, and revenue grew in all ten of the last ten years. EPS compounded at 10.2% over three years, 6.8% over five years and 10.7% over ten years. Free cash flow per share grew 29.9% over three years, fell 1.2% a year over five years and rose 9.5% a year over ten years. Next-year EPS growth is estimated at 9.8%. Recent growth is therefore driven more by earnings and cash generation than by sales, and the five-year free cash flow decline weakens the case for sustained growth.

Valuation

Valuation is red. The verdict is overvalued, with a margin of safety of -19.2% at a price of 357.93 USD. Against their ten-year medians, the P/E of 32.3 has a premium of -2.1%, EV/EBITDA of 21.8 has -0.7%, and price-to-free-cash-flow of 28.1 has -2.1%. Price-to-sales of 3.47 is 8.5% above its median, and price-to-book of 21.7 is 17.8% above its median. The DCF gives 217.47 USD per share, using a discount rate of 10.1%, 7.6% initial growth and 2.5% terminal growth, with 51.8% of the value in the terminal period. The fair value band is built on fixed assumptions, including a 5% equity risk premium and capped growth, so it is an order of magnitude, not a price target. The reverse DCF implies 13.2% growth, which compares with 5.1% revenue growth over five years. The dividend yield is 0.9% and the payout on free cash flow is 25.5%.

Risks

The current ratio of 0.71 means short-term obligations exceed short-term assets, so a weaker cash flow would tighten liquidity quickly. Net debt to EBITDA of 2.99 and debt to equity of 3.52 leave little room if earnings fall. Falling estimates would reduce the earnings base on which the current multiples rest. A price-to-book of 21.7 is far above the company's history, and a reversion toward the historical median would lower the price. The DCF relies on 13.2% implied growth, well above the 5.1% delivered. The Beneish M-score is not available. The analysis has no debt maturity schedule and no revenue by segment, so it cannot test refinancing risk or the performance of individual businesses.