THE SHERWIN-WILLIAMS COMPANY (SHW): what the price assumes

In the published model solve dated 2026-Q2, anchored at $344.86, THE SHERWIN-WILLIAMS COMPANY (SHW) is priced for +10.1% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-28.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/SHW

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 8.4% cost of capital with 4% terminal growth over a 5-year stage.

How unusual the bet is: within-range (limited comparison data)

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.0%); the inversion above states its own rate.

Per-Model Detail (n=16)

Economic-Unit Decomposition (Sum Of The Parts)

The disclosed units share an operating capital structure; consolidated cash-flow lenses remain coherent and the unit split is explanatory.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Operating profit is negative or near zero and the company has no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so years-to-repay cannot be computed honestly.

Operating profit is negative or near zero and there is no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so interest coverage cannot be computed honestly.

Bullet Takeaways

• Sherwin-Williams sells most of its paint through a store network it owns, not through someone else's shelf: the Paint Stores Group ran 4,853 company-operated stores in the United States, Canada and the Caribbean at the end of 2025 and earned a 22.3% pre-tax margin, against 9.2% for the consumer-brands arm and 14.5% for performance coatings.
• The price assumes the whole company compounds operating profit at roughly 9.6% a year for five years, and none of the standard valuation families reaches today's level; the demand backdrop works against that, with management telling investors in April 2026 to expect little to no recovery in most end markets this year.
• The next read is volume: management held full-year EPS guidance of $10.70 to $11.10 even after shifting its volume view from growth to a low-single-digit decline, leaning on price to fill the gap, which is the lever to watch through 2026.

Bull Case

Start with what management does with the cash, because that is where the durability of this business shows up. The share count has fallen about 1.5% a year, and Sherwin-Williams keeps buying its own stock while still funding store openings and a dividend. That is the signature of a business that throws off more cash than it needs to run itself. The reason it does is the store network. The Paint Stores Group sells Sherwin-Williams paint through 4,853 company-operated stores in the United States, Canada and the Caribbean, and the 10-K is plain about the model: each store is "engaged in servicing the needs of architectural and industrial paint contractors and do-it-yourself homeowners". Owning the distribution rather than renting shelf space is what lets the company keep the relationship with the professional painter, who buys in volume and comes back.

The segment economics prove the point. In 2025 the Paint Stores Group did $13,605.9 million of net sales at a 22.3% pre-tax margin, while the Consumer Brands Group ran at 9.2% and Performance Coatings at 14.5%. The highest-margin, largest segment is the one the company controls end to end. That margin is not an accident of pricing power alone; it reflects a closed loop where Sherwin-Williams makes the paint, ships it to its own stores, and sells it to a contractor who values consistency and availability over saving a few cents. Gross margin across the company expanded in 2025 on what the filing describes as "selling prices and moderating raw material costs, partially offset by lower sales volume", which means the company widened margins in a year when it sold less paint. That is the test of pricing power, and it passed.

The forward case is that the loop keeps compounding even with the housing market flat. The October 2025 acquisition of Suvinil extended the consumer-brands footprint, and the Consumer Brands Group grew net sales 19.2% in the first quarter of 2026 with that deal in the base. Performance Coatings, the industrial arm, served customers across "North and South America, with additional operations in the Caribbean region, Europe, Asia and Australia", giving the company a second growth axis that does not depend on the U.S. repaint cycle. Interest coverage near ten times means the balance sheet can carry the dividend and the buyback through a soft demand year. The bull case is not that paint demand surges; it is that a company controlling its own distribution can take price and share while the cycle waits.

Bear Case

The bear case begins where the moat is thinnest, which is the two segments Sherwin-Williams does not fully control. The Consumer Brands Group sells through other retailers' shelves, and its margin tells the story: 9.2% pre-tax in 2025 against the Paint Stores Group's 22.3%. The 10-K notes the Consumer Brands gross profit "decreased $42.2 million in 2025 compared to the same period in 2024", a reminder that the parts of the business exposed to third-party distribution and DIY demand do not enjoy the same protection as the company-operated stores. Where the company competes on someone else's terms, the economics compress.

The demand picture is the real pressure on the thesis. Sherwin-Williams sells into "home turnover and new non-residential construction", and the 10-K is direct that shifts in those markets "have in the past adversely impacted and may in the future adversely impact demand for some of our products". Management told investors in April 2026 to expect little to no recovery in most end markets this year, and it cut its volume outlook from growth to a low-single-digit decline, holding earnings guidance only by leaning harder on price. Price can hold a margin for a while, but a contractor who paints fewer houses buys fewer gallons regardless of the per-gallon price, and the raw-material tailwind that helped 2025 is not guaranteed: the filing flags that resins and solvents derived from "propylene and ethylene" remained flat in 2025 after years of inflation, and management has warned that tariffs could push those costs back up.

The most arithmetic version of the bear is what the price requires. At today's level the market is paying about 19 times company-wide operating income, which embeds operating-profit growth near 9.6% a year for five years. None of the standard valuation lenses reaches the price: it sits above where the asset-value methods, the earnings-power methods, peer multiples, and even the forward-growth methods land. The current operating margin is about 20.5%, and the price requires the company to sustain a level of profit growth that runs ahead of a demand environment management itself describes as soft. If volume stays flat and price normalizes, that 9.6% requirement does not get easier; it gets harder, and the multiple has further to fall than to rise. Net debt sits at about 2.4 times operating income, comfortable for a stable cash generator but not a cushion that makes the growth requirement go away.

Valuation

Today's price pays about 19 times company-wide operating income, and the bet inside that number is straightforward: the market is asking Sherwin-Williams to grow operating profit roughly 9.6% a year for five years off a business that already earns a 20.5% operating margin. That near-term pace is within what the company has recently delivered. The stretch is in how long it must persist, not in the rate itself, and it is a whole-company demand the price is making, not a wager on any one segment.

What makes the price unusual is that no family of valuation method reaches it. The asset-value methods, which value the company off book value and excess returns, land well below the price. The earnings-power methods, which capitalize current profit, land furthest below. Peer multiples and even the forward-growth methods, which credit next-period growth, both come in under the price as well. When every lens sits below the market, the price is not a bet that one conservative method is wrong; it is a bet beyond what any standard frame supports, and the burden falls entirely on growth persistence. The four reported segments carry different economics, with the Paint Stores Group at a 22.3% pre-tax margin doing the heavy lifting and the Consumer Brands Group at 9.2% the laggard, so the blended company multiple reflects a mix the market is paying a premium across rather than for any single part.

The balance sheet sets the floor under the downside. Net debt of about $11.7 billion runs roughly 2.4 times operating income, interest coverage sits near ten times, and the share count has declined about 1.5% a year, so the company is returning cash rather than diluting. That is a profile that can carry a dividend and a buyback through a soft year without strain. It does not, however, lower the growth bar embedded in the price. The strength of the balance sheet bounds how badly a soft cycle can hurt; it does nothing to make the 9.6% sustained-growth requirement easier to clear.

Catalysts

The first quarter of 2026 set the tone for the year. Sherwin-Williams reported diluted EPS of $2.35, ahead of the $2.28 consensus, on net sales of $5.67 billion, up 6.8% year over year, with the October 2025 Suvinil acquisition and favorable currency translation contributing to the top line. Gross margin expanded 90 basis points to 49.1% on moderating raw-material costs. Within the segments, the Paint Stores Group grew net sales 3.7% with same-store sales up 2.4%, the Consumer Brands Group jumped 19.2% on the Suvinil addition, and Performance Coatings grew 6.5%.

The guidance is where the watch points sit. Management reaffirmed full-year 2026 diluted EPS guidance of $10.70 to $11.10, with net sales expected to grow a low- to mid-single-digit percentage and second-quarter sales up a mid-single-digit percentage. The notable shift was beneath the headline: management moved its volume view from growth to a low-single-digit decline and held the earnings range by leaning on higher-than-expected pricing. That makes the durability of price the central question for the rest of the year.

Analyst sentiment frames the demand backdrop. The stock carries a mix of Buy and Neutral ratings, with a consensus price target near $380. Recent moves include BofA's Matthew DeYoe raising his target to $369 while keeping a Neutral rating, and Berenberg trimming its target to $380 from $400 while staying Buy. The recurring theme across the notes is housing: executives described a weaker-for-longer view of the U.S. architectural market, tying any meaningful recovery to lower interest rates or house prices, while pointing to professional-painter share gains as the offset that holds the thesis together in a flat year.

Peer Cohorts (Per Segment, With Filing Citations)

Paint Stores Group / Consumer Brands Group / Performance Coatings Group (reported)

• PPG (PPG INDUSTRIES INC)
• FY2025 10-K: …to customers, government agencies and independent distributors Ennis-Flint® Segment Overview This reportable business segment primarily supplies a variety of protective coatings, adhesives, sealants and finishes along with pavement marking products and related chemicals, transparencies and paint films. Alliances PPG…
• FY2025 10-K: America and Europe • Asian Paints to serve certain automotive OEM and industrial coatings customers in India Major Competitive Factors Product performance, technology, quality, technical and customer service, price, customer productivity and distribution. Global Competitors Akzo Nobel N.V., Axalta Coating Systems…
• RPM (RPM International Inc.)
• FY2025 10-K: …Square Feet Of Location Business/Segment Floor Space Hertogenbosch, Netherlands Rust-Oleum (Consumer) 517,627 Cacapava, Brazil Euclid (CPG) 383,777 Pleasant Prairie, Wisconsin Rust-Oleum (Consumer) 261,000 Fairborn, Ohio Rust-Oleum (Consumer) 258,886 Cleveland, Ohio Day-Glo (SPG) 224,624 LaFayette, Georgia Euclid…
• FY2025 10-K: Attleboro, Massachusetts Rust-Oleum (Consumer) 133,650 Hudson, North Carolina Wood Finishes Group (SPG) 132,300 Ellaville, Georgia TCI (SPG) 129,600 Wigan, Lancashire, United Kingdom CPG Europe (CPG) 122,000 Tocancipa, Colombia Euclid (CPG) 114,849 Johannesburg, South Africa Stonhard (PCG) 112,956 Birtley, United…
• AXTA (AXALTA COATING SYSTEMS LTD.)
• FY2025 10-K: …our operations. Performance Coatings Customers Within our Performance Coatings segment, we sell coatings to customers in more than 140 countries. Our top ten customers accounted for approximately 17% of our Performance Coatings net sales during the year ended December 31, 2025. In our industrial and refinish…
• FY2025 10-K: …to drive demand for our products, which in turn are purchased through customers in our distributor network. Due to the local nature of the refinish industry, our sales force operates on a regional/country basis to provide clients with responsive customer service and local insight. As part of their coverage efforts,…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.