We Won't Paint Over Our View of Overvalued Sherwin-Williams
We strongly recommend clients avoid purchasing shares, or divest their current holdings of this narrow-moat firm.
Charles Gross: Narrow-moat Sherwin-Williams is among the largest producers of architectural and industrial paint in the world. We assign a $340 per share fair value, well below the prevailing market price of $590. With shares trading well into 1-star territory, we strongly recommend clients avoid purchasing shares, or divest their current holdings.
The market price currently bakes in two key assumptions that we disagree with. The first is that Sherwin-Williams will gain unrealistic amounts of market share over the coming decade. The second is that the company will achieve record-breaking adjusted EBITDA margins and sustain them over the economic cycle. Both outcomes appear highly unlikely to play out.
Charles Gross does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.