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Today we're going to take a look at the well-established The Sherwin-Williams Company (NYSE:SHW). The company's stock saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Sherwin-Williams’s outlook and value based on the most recent financial data to see if the opportunity still exists.
See our latest analysis for Sherwin-Williams
What Is Sherwin-Williams Worth?
According to my valuation model, Sherwin-Williams seems to be fairly priced at around 10.80% above my intrinsic value, which means if you buy Sherwin-Williams today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $214.19, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Sherwin-Williams’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Sherwin-Williams look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 50% over the next couple of years, the future seems bright for Sherwin-Williams. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? It seems like the market has already priced in SHW’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on SHW, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.