The Sherwin-Williams (SHW), mcap=$52bn, price $201 vs $234

$SHW pitch:
– Paint and coatings producer/retailer with a network of 4,500 stores in the US, Canada & LatAm.
– 50% market share in the US, with the next 3 competitors at 15%, 15%, and 5%.
– An extremely profitable and well-managed franchise.
– Currently underearning due to temporarily depressed gross margins, expected to normalize by 2024 from 41% to 47%.
– Vertically integrated and controls local monopolies.
– The stock has declined +30% over the last few months in expectation of the housing slowdown.

$SHW valuation:
– Stock is reasonably at 27x guided 2022 earnings, however, SHW is currently underearning.
– With normalized margins, 2024 earnings are expected at $13.5/share.
– At 27x would be $365 stock

Exp. gain: +55% to $365/share in 2 years.

Full SHW write-up (free guest account required):

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