Why We Like The Returns At Sherwin-Williams (NYSE:SHW)

Finding a business that has the potential to grow substantially is not easy, but it is possible if we look at a few key financial metrics. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. With that in mind, the ROCE of Sherwin-Williams (NYSE:SHW) looks great, so lets see what the trend can tell us.

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Return On Capital Employed (ROCE): What Is It?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. To calculate this metric for Sherwin-Williams, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.23 = US$3.8b ÷ (US$25b - US$7.9b) (Based on the trailing twelve months to March 2025).

Thus, Sherwin-Williams has an ROCE of 23%. In absolute terms that's a great return and it's even better than the Chemicals industry average of 8.7%.

View our latest analysis for Sherwin-Williams

Above you can see how the current ROCE for Sherwin-Williams compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Sherwin-Williams .

What Can We Tell From Sherwin-Williams' ROCE Trend?

Sherwin-Williams' ROCE growth is quite impressive. The figures show that over the last five years, ROCE has grown 38% whilst employing roughly the same amount of capital. Basically the business is generating higher returns from the same amount of capital and that is proof that there are improvements in the company's efficiencies. On that front, things are looking good so it's worth exploring what management has said about growth plans going forward.

The Key Takeaway

To sum it up, Sherwin-Williams is collecting higher returns from the same amount of capital, and that's impressive. And with a respectable 94% awarded to those who held the stock over the last five years, you could argue that these developments are starting to get the attention they deserve. Therefore, we think it would be worth your time to check if these trends are going to continue.

One more thing, we've spotted 2 warning signs facing Sherwin-Williams that you might find interesting.

Sherwin-Williams is not the only stock earning high returns. If you'd like to see more, check out our free list of companies earning high returns on equity with solid fundamentals.

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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.