Last months are quite disappointing for SHW shareholders – shares are almost flat from March and in my opinion 1% dividend yield is not satisfying. Is there an opportunity for share price appreciation in the following months?

Reminding, results for first half of 2016 were good. Well it is not a high tech company, so having growth of around 10% is definitely a decent result.

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Also prospects on 3Q and 4Q are quite positive

  • Anticipates 3Q16 sales increase of low to mid-single digit percentage and EPS in the range of $4.10 to $4.30, including an approximately $.10 per share net charge for acquisition costs partially offset by a reduction in the income tax provision
  • Raising FY16 EPS guidance to $11.65 to $11.85 per share, including an approximately $.85 per share net charge for acquisition costs partially offset by a reduction in the income tax provision vs. $11.16 per share in 2015:

Well it is not a common situation that after raising EPS guidance shares are steadily declining (from top it is around 10% by now).

If we look on valuation it is demanding:

EV/EBITDA ~13

P/E ~ 21

PPG Industries is a little bit cheaper and over the last 3 years shares of PPG are performing significantly weaker. Having in mind that both companies are high quality I prefer PPG – also dividend yield is higher, but in both cases it is low.

 

Summing up, Sherwin Williams is a good company, but valuation is too high in my opinion. I will patiently wait for better prices.

 

Disclaimer SHW – no position