QS Research · Michael Burry's Scion Capital analyst template · 2006
SHERWIN WILLIAMS CO (SHW)
As of 2026-11-06 · 12/15 boxes filled from SEC filings and market data
Conclusion: SHORT
Conviction medium · base case -31% · downside -59% · upside +12%
Using section 13's TTM base (N10), not a cycle average: EBITDA $4.43B, EBIT $4.03B, net income $2.68B and FCF $3.08B, with lease-adjusted net debt $13.61B ($11.80B debt + $2.07B leases - $0.264B cash). At 16.0x EV/EBITDA, still above the 13.9x highest coatings peer, equity is 4.43 x 16 - 13.61 = $57.3B, or $57.3B / 241.59M = $237/share, -31% from $344.10; the 10.7x peer low gives $140/share (-59%), while a generous 24x hold gives $384/share (+11.5%). The market is paying 21.4x EV/EBITDA and 31.1x P/E for softer-for-longer demand, Suvinil-diluted gross margin and higher debt, so the premium looks unearned and the risk/reward meets the short rule. Price/cost self-help could support the stock, but even the upside case stays below +25%.
Key numbers
- Share price: $344.10
- Market cap: $83.13B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $24.91B
- EV / EBITDA (TTM): 21.4x
- P/E (TTM): 31.1x
- Price / book: 20.90x
The 15 boxes
- ✓ 1. Long-form business notes
SHW makes and sells paint and coatings through three FY2025 reportable segments: Paint Stores Group (4,853 company-operated specialty stores in the U.S., Canada and the Caribbean), Consumer Brands Group (branded/private-label paint to retailers plus 307 Latin America stores) and Performance Coatings Group (industrial coatings and 317 branches). The FY2025 10-K shows revenue of $23.57B, gross profit of $11.52B and operating cash flow of $3.45B, versus FY2020 revenue of $18.36B and gross profit of $8.68B. The main structural change since FY2020 is the renaming of The Americas Group to Paint Stores Group and the move of 307 Latin America stores into Consumer Brands; Consumer Brands also became more intersegment-dependent (63% of 2025 sales vs 55% in 2020). Founded in 1866 and incorporated in Ohio in 1884, SHW remains a store-heavy, vertically integrated coatings business.
- ✓ 2. Competitive advantage
Sherwin-Williams is described as a leading paint and coatings manufacturer and retailer, but the 10-K says its competitive position varies by product and market and it faces many local, regional, national and international competitors in every segment. The stated edge is product quality, innovation, breadth, technical expertise, service, price and an extensive distribution platform; no source quantifies market share, brand strength, switching costs or a durable cost advantage. FY2020-FY2025 revenue grew from $18.36B to $23.57B and gross profit from $8.68B to $11.52B; FY2025 operating cash flow was $3.45B. Competition risk says rivals can have greater resources or better vendor terms, so the advantage is not absolute.
- ✓ 3. 10-Q takeaways
Q3 2026 (quarter ended 2026-09-30): sales up 7.9% to $6.860B with Paint Stores same-store sales +3.9%, but gross margin fell to 47.8% from 49.2% on Suvinil mix dilution and raw material/supply chain inflation, so income before tax was flat at $1.0635B (+0.3%) and diluted EPS rose only 0.9% to $3.38. Growth is heavily acquired: Consumer Brands sales +21.7% on a 21.5% acquisition/divestiture contribution while that segment's profit fell 7.1% to $146.2M and its margin dropped to 15.6% from 20.4%. Cash is the strong part: $2.591B operating cash in the first nine months vs $2.359B, $2.981B returned to shareholders via dividends and buybacks, and $264.2M cash against $11.795B total debt, with the leverage covenant met. Management's language is explicitly 'softer-for-longer' demand, answered with cost cuts and pricing rather than volume; risk factors were unchanged in the quarter.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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