Sherwin William Paints a Profitable Picture

09/04/2018 5:00 am EST

Focus: INDUSTRIALS

Leo Fasciocco

Investment Columnist and Publisher, Ticker Tape Digest

Sherwin Williams Co. (SHW), which produces and sells paints, coatings and related products, is our latest featured breakout stock, explains technical expert Leo Fasciocco, editor of Ticker Tape Digest.

The Cleveland-based company sells Sherwin-Williams branded architectural paint and coatings; annual revenues are $15 billion. The consumer group segment manufactures and distributes a range of paint, coatings and related products. The global finishes group produces protective and marine products, automotive finishes and product finishes.

Technically, the stock climbed to $294 by 2015 and it went into a base. It then broke out in 2017. Over the past 12 months, the stock has appreciated 35% versus a 19% gain for the stock market. The daily chart shows the stock advancing from $360 in May to a peak near $450 by July.

The stock put down a tight flat base. The breakout comes with a good pick up in volume. The stock's momentum indicator is strongly bullish.

chart

This year, analysts are forecasting a 35% spurt in net to $19.27 a share from the $14.27 the year before. Net for the upcoming third quarter is expected to rise 21% to $5.77 a share from the $4.75 the year before. Going out to the fourth quarter, analysts predict a 42% leap in net to $4.20 a share from the $2.95 the year before.

That would be an acceleration in earnings growth. The stock sells with a price-earnings ratio of 23. We see that as reasonable. Looking out to 2019, the Street projects a 16% gain in net to $22.28 from the anticipated $19.27 for this year.

We are targeting SHW for a move to $540 within the next few months, or sooner. A protective stop can be placed near $440. We also see chances for a stock split — which would be bullish.

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