Contributor, Benzinga
February 23, 2022
$322.77
-11.78[-3.52%]
Last update: 1:09PM (Delayed 15-Minutes)
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Open327.400Close-
Vol / Avg.601.732K / 1.373MMkt Cap82.015B
Day Range322.700 - 329.03052 Wk Range220.220 - 348.374

Sherwin-Williams Co. (NYSE: SHW) is a developer, manufacturer, seller and distributor of paints, coatings and related products. The company operates in three segments: The Americas Group, Consumer Brands Group and Performance Coatings Group.

Founded in 1866 in Cleveland, Ohio, the company is an established leader in the specialty chemicals sector. As of Dec. 31, 2021, it had 4,700 stores and 61,000 employees.

How to Buy Sherwin-Williams Stock

Step 1: Pick a brokerage.

The easiest and the most convenient way to buy a stock is through a brokerage — a regulated intermediary between you and the stock market. With the latest technology improvements, you can buy and sell stocks through web platforms or even your phone in seconds.

Step 2: Decide how many shares you want.

The number of shares to buy depends on share price, portfolio size and risk management strategy. As SHW currently trades around $272, you might think about using a broker that allows for fractional reserve ownership. This option might come particularly handy if you’re going to invest a fixed amount of money periodically to buy a basket of stocks.

Step 3: Choose your order type.

You can use different methods to instruct your broker on how to buy shares. It is necessary to understand the basics before investing. Thus you should practice on the broker’s demo platform before executing the first live trade.

  • Market order: This order instructs your broker to buy or sell shares immediately, regardless of price. It is the fastest way, but you will probably get a slightly worse entry price.
  • Limit order: This order will work only at a certain level or better. For example, if the SHW price is $272.50 and you put in a limit order at $272, it will execute only if the price falls and reaches that level. This type of order is perfect for dealing with smaller cap stocks where liquidity can be an issue but also when investing for a shorter term.
  • Bid: This is the highest price a buyer is willing to pay at the moment.
  • Ask: This is the smallest price at which the seller is selling at the moment.
  • Spread: This is the difference between the bid and the ask. For example, if the bid for SHW is $272.60 and the ask is $272.75, then the spread is $0.15. A narrow spread is a sign of good liquidity in the market.

Step 4: Execute your trade.

After selecting and executing the trade, the broker will process the order. Officially you own the shares only after the broker fills your order, so keep an eye on the broker’s confirmations and statements.

Where to Buy SHW

Buying stocks is easiest through online brokers — regulated intermediaries that allow you to easily buy stocks online through web applications or even your phone.

Check Benzinga’s recommended list of brokers in the table below.

SHW Stock History & Value

Here is the visual representation of the last two years of SHW price movement.  

shw stock chart

SHW Stock Chart, Screenshot from Benzinga Pro, February 17, 2022

After retesting the 2018 lows through the 2020 turmoil, the stock almost tripled — a rare accomplishment for such a mature company.

Currently, it retraced 23% from the December 2021 top but still trades at a relatively high price-to-earnings ratio (P/E) of 38.32. This valuation is way above the sector’s average, as the U.S. chemicals industry trades at average of P/E 21.1

With the breach of support at $280, the stock doesn’t seem to be slowing down, and the next significant support zone is around the $240 level, as marked on the chart. Considering the velocity of the retracement in the last few weeks, the stock is now in a bearish trend — as long as it keeps making lower lows and lower highs.

SHW: What Analysts Are Saying

A company of this size gets a lot of attention in the market. Here are some prominent opinions regarding the SHW stock.

Jacob Hughes (Wells Fargo) Bear Case

Wells Fargo recently issued a downgrade, reducing the rating from Overweight to Equal-Weight. This isn’t a surprise after the company missed the earnings, with the earnings-per-share (EPS) coming in at $1.35 against a $1.68 consensus. The reasons are many, including raw materials inflation, supply chain headwinds, labor issues and challenging margin environments.

While the new price target of $335 isn’t a proper bear case, it is below the $353 peak price from just two months ago and well below the last target price of $380.

Jay Teugh Bull Case

Analyst Jay Teugh recently laid out the case with $295 as an intrinsic value for the stock – about 10% above the current price level.

Teugh uses the discounted cash flow valuation, assuming a similar level of after-tax earnings before interest and taxes (EBIT) growth of the past 10 years. This assumption seems reasonable since the company is a well-established leader in the specialty chemicals sector. The pole position in the industry is so pronounced that the second-largest paint producer PPG has only 600 company-owned paint stores compared to 4,700 of Sherwin-Williams.

Pros and Cons of Sherwin-Williams

Pros of SHW

  • Leader in the sector: SHW enjoys a strong advantage in the specialty chemicals sector as its enterprise value exceeds the second-largest company by 30%.
  • Stable dividend payer: The company has been paying dividends for a long time and through the last decade, it increased at a compound annual growth rate (CAGR) of 16%. Furthermore, the company just raised the dividend by 9%.
  • Low volatility stock: The stock trades with slightly higher volatility than the overall market but lower volatility compared to the materials sector.

Cons of SHW

  • High leverage: Over the past 5 years, the debt-to-equity ratio increased to 3.94, which is relatively high. Overall, the company has $9.6 billion of debt.
  • Expensive by traditional metrics: The stock is rather pricey with a P/E ratio of 37.7x and a price-to-sales (P/S) ratio of 3.5x.
  • Prevalent insider selling: Over the last 12 months, the insiders only sold their shares. While insiders might sell for any reason, lack of buying shows that insiders aren’t very optimistic about the stock.

Is SHW Stock a Buy, Sell or Hold?

Buying the stock at the moment would be the epitome of catching a falling knife — entering a risky investment that has no apparent bottom in sight.

Yet, as the stock trades below its intrinsic value, you might not want to sell it either, at least not before a pullback allows you to get out at a better price.

Thus, from the current standpoint, you can look at Sherwin-Williams as a Hold. It might drop more in the short term, but it remains a sector leader that pays a reliable dividend.

Frequently Asked Questions

Q

What does Sherwin-Williams stock split mean?

A

Stock splits are the way of lowering the price per share by increasing the number of shares outstanding. In 2021, Sherwin-Williams completed a 3-for-1 stock split, meaning that shareholders received three shares for every one share they held. The market generally sees stock splits as a positive sign with an aim to improve liquidity and present the stock as more affordable.

Q

Does Sherwin-Williams pay a dividend?

A

Yes, Sherwin-Williams pays a quarterly dividend. Currently, it yields 0.89%, which is below the industry’s average (1.9%). The dividend has been stable for the past decade, increasing from $0.52 per year in 2012 to $2.4 per year at the moment. With the current payout of 31%, the company has sufficient leeway to keep increasing the dividends.

About Stjepan Kalinic

Forex, Equity Analysis, and Financial Education