Is Now The Time To Put Sherwin-Williams (NYSE:SHW) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

In contrast to all that, many investors prefer to focus on companies like Sherwin-Williams (NYSE:SHW), which has not only revenues, but also profits. Now this is not to say that the company presents the best investment opportunity around, but profitability is a key component to success in business.

Check out our latest analysis for Sherwin-Williams

How Fast Is Sherwin-Williams Growing?

If a company can keep growing earnings per share (EPS) long enough, its share price should eventually follow. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. We can see that in the last three years Sherwin-Williams grew its EPS by 11% per year. That's a good rate of growth, if it can be sustained.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Sherwin-Williams shareholders can take confidence from the fact that EBIT margins are up from 13% to 16%, and revenue is growing. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

You don't drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for Sherwin-Williams' future profits.

Are Sherwin-Williams Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

Insider selling of Sherwin-Williams shares was insignificant compared to the one buyer, over the last twelve months. To be exact, Chairman & CEO John Morikis put their money where their mouth is, paying US$1.0m at an average of price of US$232 per share That certainly piques our interest.

On top of the insider buying, it's good to see that Sherwin-Williams insiders have a valuable investment in the business. Indeed, they have a considerable amount of wealth invested in it, currently valued at US$220m. 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. So despite their percentage holding being low, company management still have plenty of reasons to deliver the best outcomes for investors.

Does Sherwin-Williams Deserve A Spot On Your Watchlist?

One important encouraging feature of Sherwin-Williams is that it is growing profits. On top of that, we've seen insiders buying shares even though they already own plenty. That makes the company a prime candidate for your watchlist - and arguably a research priority. It is worth noting though that we have found 1 warning sign for Sherwin-Williams that you need to take into consideration.

Keen growth investors love to see insider buying. Thankfully, Sherwin-Williams isn't the only one. You can see a a free list of them here.

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.