The Sherwin-Williams Company (SHW)
Pinturas y recubrimientos (retail especializado)
Sherwin-Williams is the North American leader in paint and coatings, with an integrated manufacturing model and 4,853 company-owned stores that give it an exceptional ROIC (~22.7%) and a wide, stable moat based on brand, scale, and direct distribution; however, at current prices it trades at a net income multiple well above the range the method assigns to specialty retail, so Overvalued and the expected 5-year return is -1%.
- Price
- $348.38
- Intrinsic value (5y, base)
- $311
- Total annual return (5y)
- -1.2%
- Status (nominal)
- Overvalued
- Margin of safety
- No margin
The essentials
- ROIC of ~22.7% on real invested capital, well above the 10% bar — exceptional quality.
- Revenue accelerating to +5.8% year-over-year in the trailing twelve months after two years of near-zero growth (+0.2% in 2024, +2.1% in 2025), with guidance of a mid-to-high single-digit percentage increase for 2026.
- The current price implies a net income multiple well above the 16-22× band of the specialty retail archetype, leaving the base case with a negative expected return.
Intrinsic value — two valuation methods
Total return at 5 years: -1.2%/year = -2.2% appreciation + 1.0% dividend. The target price ($311) is ex-dividend; the $17 in dividends collected over 5 years are added separately.
By both methods, the value today (DCF $307 · Multiples $264) is below the market price ($348).
Pillars of the analysis
The verdict — today vs 5 years
Today — expensive, no margin of safety: at $348 trades ~31.9% above its value discounted to today (~$264); the expected return does not even reach the risk-free rate (4.5%).
At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.
The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$166.
Thesis
The business
Sherwin-Williams is an exceptional-quality compounder: ROIC of ~22.7% on real invested capital, a wide and stable moat based on brand and vertical integration, and a company-owned store model with strong operating leverage. Revenue, after two nearly flat years (+0.2% in 2024, +2.1% in 2025) due to the high-rate cycle, accelerated to +5.8% year-over-year in the trailing twelve months, and the company guided to a mid-to-high single-digit percentage increase for 2026.
The valuation
The method values the company by multiples on projected 5-year net income (P/E), with an exit multiple of 32× within the 16-22× band of the specialty retail archetype. That yields a value of $311 per share at 5 years in the base case — well below the current price, because the market is currently paying close to 33× trailing-twelve-month net income, a multiple that is only sustainable with terminal growth far higher than this already-mature business can offer.
The margin of safety
No margin of safety: the price already discounts a demanding scenario. The market price trades at just 3% below its 52-week high, without the typical discount of a value opportunity. The total expected return over 5 years, including dividends, is -1%, and the result is Overvalued.
What to watch
The key disconfirmation test is the speed of the housing cycle: if Paint Stores Group volume recovers faster than modeled (mortgage rates falling, repaint and new construction reactivating), the business could sustain its current rich multiple. If instead demand weakness persists in the second half of 2026 — as the company itself warns in its release — multiple compression toward the 16-22× band would arrive sooner than the base case contemplates, and the historic lead paint litigation, with no accounting provision, remains an unquantified tail risk.
Educational / informational. Does not constitute investment advice.