After The Sherwin-Williams Company’s (NYSE:SHW) recent earnings announcement in September 2018, the consensus outlook from analysts appear bearish, as a -10% fall in profits is expected in the upcoming year relative to the past 5-year average growth rate of 20%. Presently, with latest-twelve-month earnings at US$1.8b, we should see this fall to US$1.6b by 2020. Below is a brief commentary on the longer term outlook the market has for Sherwin-Williams. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
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Exciting times ahead?
Longer term expectations from the 26 analysts covering SHW’s stock is one of positive sentiment. Generally, broker analysts tend to make predictions for up to three years given the lack of visibility beyond this point. To reduce the year-on-year volatility of analyst earnings forecast, I’ve inserted a line of best fit through the expected earnings figures to determine the annual growth rate from the slope of the line.
From the current net income level of US$1.8b and the final forecast of US$2.2b by 2022, the annual rate of growth for SHW’s earnings is 14%. This leads to an EPS of $24.54 in the final year of projections relative to the current EPS of $19.52. With a current profit margin of 12%, this movement will result in a margin of 13% by 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Sherwin-Williams, there are three important factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Sherwin-Williams worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Sherwin-Williams is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Sherwin-Williams? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.