Is There Still Room for Sherwin-Williams Stock After Recent 9% Rally?

Thinking about buying, selling, or holding Sherwin-Williams stock? You are not alone. Investors are paying close attention as Sherwin-Williams continues to paint a picture of steady growth. Over the past month, shares have climbed nearly 9%, building on a solid year-to-date return of more than 11%. While the pace has cooled compared to the company’s massive 3-year and 5-year total returns (over 62% and 73%, respectively), there is still healthy debate around whether the stock’s recent run is justified by fundamentals or driven mainly by shifting market sentiment.

Sherwin-Williams’ most recent earnings showed both revenue and net income ticking upwards, with annual revenue growth of about 4.3% and net income up nearly 10%. These are not the eye-popping numbers you might see from high-flying tech plays, but in a mature sector like materials, they signal both stability and long-term demand. That said, the share price is trading only about 1.5% below analysts’ average target, which suggests that much of the good news may already be reflected in the current price.

If you are hoping for a value play here, the numbers might give you pause. According to a checklist of six standard valuation checks, Sherwin-Williams is currently undervalued in zero out of six categories, earning it a valuation score of 0. This is not the strongest vote of confidence from that angle.

However, value is rarely simple, and there are plenty of ways to judge what a stock is truly worth. Let’s explore some of those approaches and then look at a perspective on valuation that might surprise you.

Sherwin-Williams delivered 4.8% returns over the last year. See how this stacks up to the rest of the Chemicals industry.

Approach 1: Sherwin-Williams Cash Flows

A Discounted Cash Flow (DCF) model estimates what a company is worth today by projecting its future free cash flows and then bringing them back to present value based on a required rate of return.

Sherwin-Williams reported trailing twelve-month free cash flow of about $2.15 billion. Analysts forecast this figure to rise each year, reaching $4.43 billion by 2035. This steady increase highlights the company's consistent ability to generate cash, which is a good indicator of its underlying strength and long-term demand.

Using these projections, the DCF model assigns Sherwin-Williams an intrinsic value of about $303 per share. Compared to the current stock price, this implies the shares are actually trading 23.1% above what the cash flows suggest they are worth. In other words, the stock is 23.1% overvalued by this method.

For investors relying on fundamental cash flow projections, Sherwin-Williams looks expensive at today’s levels.

Result: OVERVALUED

Our DCF analysis suggests Sherwin-Williams may be overvalued by 23.1%. Find undervalued stocks based on DCF analysis or create your own screener to find better value opportunities.

Approach 2: Sherwin-Williams Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used for profitable companies like Sherwin-Williams because it puts the company’s share price in context with its ability to generate earnings. For mature businesses with a long track record of profitability, the PE ratio helps investors gauge how much they are paying for each dollar of earnings.

What counts as a “fair” PE ratio can vary. Higher growth or lower risk typically justifies a higher multiple, while slower-growing or riskier businesses usually trade at lower PE ratios. In Sherwin-Williams’ case, the current PE ratio stands at 36.4x, which is notably higher than both the average for its Chemicals industry peers (about 26.9x) and the peer average of 27.4x.

Simply Wall St’s proprietary Fair Ratio factors in not just growth and profitability, but also the company’s market positioning, risk profile, and recent earnings trends. For Sherwin-Williams, the Fair Ratio is 23.86x. With the company trading at a 36.4x PE, it sits well above what would be considered a fair valuation by these standards.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Sherwin-Williams Narrative

While traditional valuation methods focus on numbers alone, a Narrative is your personal story about a company. It is a way to connect what you believe about Sherwin-Williams’ future with financial forecasts and an estimated fair value. Instead of relying only on historical trends or market multiples, Narratives help you build a clear picture that combines your views on industry changes, company strengths, and future prospects. This approach directly links your outlook to specific revenue, earnings, and margin predictions.

The Simply Wall St platform makes this process simple and accessible, bringing together millions of investors to share and compare their Narratives. By choosing or customizing a Narrative, you can immediately see how your outlook translates into a fair value for Sherwin-Williams, making it easier to decide whether the current stock price represents a buying opportunity or a reason to hold off.

Narratives update automatically as new earnings or news are released, ensuring your perspective always reflects the latest information. For example, one investor’s optimistic Narrative might estimate Sherwin-Williams’ fair value at $420 per share, while a more conservative scenario could point to $258 per share. This highlights that your investment decision can adapt dynamically as your view or the market evolves.

Do you think there's more to the story for Sherwin-Williams? Create your own Narrative to let the Community know!

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.

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