Here's Why We Think Sherwin-Williams (NYSE:SHW) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Sherwin-Williams (NYSE:SHW). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Sherwin-Williams with the means to add long-term value to shareholders.

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How Quickly Is Sherwin-Williams Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. That makes EPS growth an attractive quality for any company. We can see that in the last three years Sherwin-Williams grew its EPS by 15% per year. That growth rate is fairly good, assuming the company can keep it up.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. It seems Sherwin-Williams is pretty stable, since revenue and EBIT margins are pretty flat year on year. That's not bad, but it doesn't point to ongoing future growth, either.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

View our latest analysis for Sherwin-Williams

Fortunately, we've got access to analyst forecasts of Sherwin-Williams' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Sherwin-Williams Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$84b company like Sherwin-Williams. But we are reassured by the fact they have invested in the company. Notably, they have an enviable stake in the company, worth US$255m. We note that this amounts to 0.3% of the company, which may be small owing to the sheer size of Sherwin-Williams but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.

Is Sherwin-Williams Worth Keeping An Eye On?

One important encouraging feature of Sherwin-Williams is that it is growing profits. If that's not enough on its own, there is also the rather notable levels of insider ownership. The combination definitely favoured by investors so consider keeping the company on a watchlist. We don't want to rain on the parade too much, but we did also find 1 warning sign for Sherwin-Williams that you need to be mindful of.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.