Is Now An Opportune Moment To Examine The Sherwin-Williams Company (NYSE:SHW)?

Let's talk about the popular The Sherwin-Williams Company (NYSE:SHW). The company's shares saw a decent share price growth of 13% on the NYSE over the last few months. The company is inching closer to its yearly highs following the recent share price climb. 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? Today we will analyse the most recent data on Sherwin-Williams’s outlook and valuation to see if the opportunity still exists.

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What's The Opportunity In Sherwin-Williams?

According to our valuation model, the stock is currently overvalued by about 24%, trading at US$372 compared to our intrinsic value of $300.27. This means that the opportunity to buy Sherwin-Williams at a good price has disappeared! But, is there another opportunity to buy low in the future? Given that Sherwin-Williams’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

See our latest analysis for Sherwin-Williams

Can we expect growth from Sherwin-Williams?

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 35% 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 well and truly priced in SHW’s positive outlook, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe SHW should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on SHW for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for SHW, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Sherwin-Williams at this point in time. Every company has risks, and we've spotted 1 warning sign for Sherwin-Williams you should know about.

If you are no longer interested in Sherwin-Williams, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.