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Compare Sherwin-Williams to Other Paint Stocks

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Compare Sherwin-Williams to Other Paint Stocks

Comparing Sherwin-Williams (SHW) with other paint and coatings stocks means looking beyond the stock price to see which company is financially healthier, growing faster, or cheaper relative to its earnings. This guide walks you through the key metrics, where to find them, and how to interpret them so you can make an informed decision. You’ll need access to a stock screener or financial website (like Yahoo Finance, Morningstar, or your brokerage’s research tools) and the latest annual or quarterly reports from the companies you want to compare.

What You’ll Need

  • A stock screener or financial data website (free options are fine)
  • The ticker symbols for the companies you want to compare (e.g., SHW, PPG, RPM, AXTA, Valspar if still listed)
  • Access to each company’s latest 10-K (annual report) or investor relations page
  • A spreadsheet or notepad to track the numbers

Step-by-Step

  1. List your comparables. Start with the major paint and coatings players: Sherwin-Williams (SHW), PPG Industries (PPG), RPM International (RPM), Axalta Coating Systems (AXTA), and possibly AkzoNobel (AKZOY) or BASF (BASFY) if you want international exposure. Write down their tickers.
  2. Pull up the key valuation metrics. On your financial site, look up each ticker and note the P/E ratio (price-to-earnings), P/S ratio (price-to-sales), and P/B ratio (price-to-book). These tell you how much you’re paying for each dollar of earnings, sales, or book value. Sherwin-Williams often trades at a premium P/E because of its strong brand and consistent growth, but you need to see if that premium is justified.
  3. Compare growth rates. Look at the revenue growth and earnings per share (EPS) growth over the last 1, 3, and 5 years. A company with higher growth can justify a higher P/E. Use the “Growth” tab on most financial sites. For example, if SHW has 10% EPS growth and PPG has 5%, SHW’s higher P/E may be reasonable.
  4. Check profitability margins. Look at gross margin, operating margin, and net margin. Paint companies have different cost structures. Sherwin-Williams has high margins due to its direct-to-consumer store network, while PPG has a more diversified industrial portfolio. Higher margins usually mean a competitive advantage.
  5. Examine debt levels. Look at the debt-to-equity ratio and interest coverage ratio. Sherwin-Williams has taken on significant debt for acquisitions (like Valspar), so you need to see if it’s manageable. A debt-to-equity ratio above 1.5 is common in this industry, but compare it to peers. Also check the current ratio (current assets divided by current liabilities) to see if they can cover short-term obligations.
  6. Look at free cash flow. Find the free cash flow (operating cash flow minus capital expenditures) for each company. This is the money available for dividends, buybacks, and debt reduction. Compare free cash flow yield (FCF divided by market cap) to see which stock gives you more cash back for your investment.
  7. Consider dividend history. If you’re an income investor, check the dividend yield and the payout ratio. Sherwin-Williams has paid dividends for decades, but the yield is typically low (around 1%). RPM has a higher yield (around 2%). Also look at the dividend growth rate over 5 years.
  8. Analyze the business model qualitatively. Read the latest annual report summaries. Sherwin-Williams has the largest paint store network in North America, which gives it pricing power. PPG is more global and diversified. RPM focuses on specialty coatings and sealants. Axalta is pure-play on transportation coatings. Understand what drives each business.
  9. Use a comparison table. Create a simple table with rows for each metric (P/E, P/S, revenue growth, net margin, debt-to-equity, FCF yield, dividend yield) and columns for each company. Fill in the numbers. This makes it easy to see which stock stands out.
  10. Make a judgment. No single metric tells the whole story. A stock with a lower P/E might be a value trap if growth is slowing. A high P/E might be justified if the company is consistently beating earnings. Weigh the metrics based on your investment style (growth vs. value vs. income).

Common Mistakes

  • Comparing P/E ratios across different fiscal years. Make sure you’re using the same time period (e.g., trailing twelve months) for all companies.
  • Ignoring one-time charges. Earnings can be skewed by restructuring costs or acquisition expenses. Use “adjusted” EPS when available, but also check the GAAP numbers to see the real picture.
  • Looking only at the stock price. A $300 stock can be cheaper than a $30 stock if the first has lower P/E. Always use ratios, not price.
  • Forgetting about cyclicality. Paint sales are tied to housing and construction. In a downturn, all paint stocks may fall together. Compare them relative to each other, not just on absolute numbers.
  • Overlooking the impact of raw material costs. Paint companies are affected by the price of titanium dioxide, resins, and petrochemicals. Check the latest earnings call transcripts for comments on input costs.

Tips

  • Use the same source for all data to ensure consistency. If you pull P/E from one site and P/S from another, the numbers might be calculated differently.
  • Look at the 5-year average P/E for each company. This tells you if the current P/E is high or low relative to its own history.
  • Pay attention to the company’s guidance. If Sherwin-Williams expects strong growth next year, that might justify a premium valuation.
  • Consider the competitive moat. Sherwin-Williams’ store network is a huge barrier to entry. PPG’s scale in aerospace and automotive coatings is also a moat. A moat can support a higher valuation.
  • If you’re using a stock screener, set filters for the sector (Basic Materials or Chemicals) and industry (Specialty Chemicals) to narrow down the list.

Troubleshooting

  • Data seems inconsistent. If one site shows a P/E of 30 and another shows 35, they may be using different earnings periods (e.g., trailing vs. forward). Check the date and use the same basis.
  • Missing financials for a company. Some international companies (like AkzoNobel) report in euros and have ADRs. Make sure you convert to a common currency or use ratios (which are currency-neutral) for comparison.
  • Can’t find free cash flow. If your site doesn’t show it, calculate it yourself: take operating cash flow from the cash flow statement and subtract capital expenditures (from the investing section).
  • Stock screener doesn’t have all the metrics. Use the screener for the basics (P/E, P/S) and then visit each company’s investor relations page for the detailed income statement and balance sheet.
  • Not sure which companies are direct competitors. Sherwin-Williams competes with PPG in paints and coatings, but also with smaller regional players like Kelly-Moore or Benjamin Moore (owned by Berkshire Hathaway). For the stock comparison, stick to the publicly traded pure-plays or large diversified chemical companies.

Frequently Asked Questions

  1. Is Sherwin-Williams overvalued compared to PPG? Not necessarily. SHW often has a higher P/E, but it also has higher growth and margins. You need to compare the P/E-to-growth (PEG) ratio. If SHW’s PEG is below 2, it may still be reasonably priced.
  2. What is the best metric for comparing paint stocks? There’s no single one. Use a combination: P/E for valuation, revenue growth for momentum, net margin for profitability, and free cash flow yield for cash generation. Also consider the debt-to-equity ratio because paint companies often use debt for acquisitions.
  3. Should I look at the stock price or market cap? Market cap. The stock price is arbitrary (affected by splits and buybacks). Market cap tells you the total value of the company, which is more meaningful for comparison.
  4. How does Sherwin-Williams’ business model differ from PPG’s? SHW sells through its own stores and focuses on professional painters, giving it higher margins and customer loyalty. PPG sells through multiple channels (home improvement stores, industrial distributors) and has a larger international presence. This affects growth stability and margins.
  5. Are there any cyclical risks in paint stocks? Yes. Paint demand is tied to housing starts, commercial construction, and auto production. During a recession, all paint stocks may see declining sales. Compare how each company has performed in past downturns (e.g., 2008) to gauge resilience.
  6. Can I compare Sherwin-Williams to a non-paint stock like Home Depot? You can, but it’s not apples-to-apples. Home Depot is a retailer with a different cost structure. Stick to paint and coatings companies for a more meaningful comparison.

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