SHW Sherwin-Williams
Elite paint moat worth a longer runway, but $329 still assumes a housing rebound we can't underwrite.
The story
Sherwin-Williams is the best-run franchise in architectural paint. Its roughly 5,000 company-owned stores serve pro painters directly, which gives it pricing power and sticky share that competitors who sell through big-box retailers can't match. It is a mature compounder: volume is stalled by a frozen housing market, but it keeps growing through price, new stores and mix, and its margins are near the top of its history. The question is not quality; it is how long excess returns last and how much of that the market already prices in.
TTM revenue of $24.4B, up about 3.5%, plus the store buildout justify a small move in year-1 growth to 4%. Target margin goes to 18% (from 17%) because the pro-channel mix, AI and cost programs, and 16%+ margins held through a housing slump show pricing power. The one material change is horizon, from 6 to 10 years: my previous 6-year horizon treated a proven, decades-long moat like an ordinary business, and I was implying a greater-than-100% mispricing on a heavily covered name. Even so, the value probably stays well below price, which says the market is paying for a housing recovery and returns lasting longer still.
Value drivers
| Revenue growth (Y1) | 4.0% |
| Terminal growth | 2.5% |
| Forecast horizon | 10y |
| Target operating margin | 18.0% |
| Years to target margin | 5 |
| Sales-to-capital | 1.60 |
| Beta | 1.10 |
| Failure probability | 1.0% |
| Cost of capital (WACC) | 9.6% |
| Terminal WACC | 9.2% |
Valuation bridge
| PV of explicit FCFF | 20.88B |
| PV of terminal value | 23.86B |
| Equity value | 33.74B |
| ÷ shares → per share | $138.97 |
News
bearish -0.20 · 8 articles
- Is Home Depot’s Dividend Safe if Housing Stays Frozen?
- Should Sherwin-Williams’ (SHW) Aggressive Store Expansion and Tech Spend Require Action From Investors?
- Sherwin-Williams 'Well-Positioned' to Deliver Volume Growth, RBC Says
- Sherwin-Williams Targets Growth With Store Expansion, AI and Margin Gains
- 3 Reasons to Avoid SHW and 1 Stock to Buy Instead
- How Much Further Could Lowe's Stock Fall With Its DIY Shoppers Holding Back?
- Sherwin-Williams Investor Event Set to Address Demand, Cost Pressures, RBC Says
- Of These 3 Income Stocks, 1 Is a Year Away From Joining the Dividend Kings
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 25.39B | 4.0% | 16.7% | 3.27B | 610.26M | 2.66B | 2.43B |
| 2 | 26.36B | 3.8% | 17.1% | 3.46B | 608.22M | 2.85B | 2.37B |
| 3 | 27.33B | 3.7% | 17.4% | 3.65B | 604.08M | 3.05B | 2.32B |
| 4 | 28.28B | 3.5% | 17.7% | 3.85B | 597.76M | 3.25B | 2.25B |
| 5 | 29.23B | 3.3% | 18.0% | 4.05B | 589.23M | 3.46B | 2.19B |
| 6 | 30.15B | 3.2% | 18.0% | 4.18B | 578.42M | 3.60B | 2.08B |
| 7 | 31.06B | 3.0% | 18.0% | 4.30B | 565.33M | 3.74B | 1.97B |
| 8 | 31.94B | 2.8% | 18.0% | 4.42B | 549.94M | 3.87B | 1.86B |
| 9 | 32.79B | 2.7% | 18.0% | 4.54B | 532.26M | 4.01B | 1.76B |
| 10 | 33.61B | 2.5% | 18.0% | 4.65B | 512.30M | 4.14B | 1.66B |
Key risks
- Housing turnover stays frozen, so existing-home repaint and new-build volume stay weak through 2027
- Store expansion and tech spending lift the cost base before volume comes back, capping margin gains
- About $10.7B of net debt and buybacks leave less room if a recession hits pricing
Catalysts
- Lower mortgage rates unlock existing-home sales and repaint demand
- Pro-channel share gains plus operating leverage push operating margin toward 18-19%