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News Breaks
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November 8, 2009
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| 18:11 EDT |  | SHW |
| theflyonthewall.com: | Sherwin-Williams should prosper as the economic recovery unfolds, Barron's says | | Sherwin-Williams' (SHW) year-over-year sales have been largely negative for most of the past three years. Yet it's stock has shown uncommon resilience. Trading at $58, it's well above a 52-week low of $42 set in March's market swoon, and not far off a recent high near $64. That's well above the $53.50 the shares fetched in April, when Barron's sounded a cautionary note on the stock. However, lately Barron's has turned more favorable toward the company. For one thing, the economy seems to be reviving more than commonly appreciated which augurs well for sales of paint, coating and other finishes. Second, Sherwin-Williams is well run. The company has been able to raise its dividend for each of the past thirty years without skimping on store expansion or research and development over the same period. Also, Sherwin-Williams is using its significant free cash flow to buy in shares. With nearly twice the number of North American stores of all its rivals combined, Sherwin-Williams continues to take market share. Its controlled-distribution model, in which it manufactures, ships and mostly sells it products in company-owned units, has given it greater control over its costs. As a result, the company has enjoyed steadier profit margins and higher returns on assets than many of its rivals. The target prices of most of the analysts now are relatively modest, ranging from $61 at UBS, to $72 at Bank of America/Merrill Lynch. However, a buy-side analyst who wants to remain anonymous, and who has followed the company for many years expects a lot more sizzle. Put a typical Sherwin multiple of 15 on earnings, you're looking at a $90 stock, that analyst notes. Reference Link :theflyonthewall.com |
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