Intrinsic value of Sherwin-Williams - SHW

Previous Close

$407.02

  Intrinsic Value

$569.90

stock screener

  Rating & Target

buy

+40%

Previous close

$407.02

 
Intrinsic value

$569.90

 
Up/down potential

+40%

 
Rating

buy

We calculate the intrinsic value of SHW stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 38.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  4.56
  16.00
  14.90
  13.91
  13.02
  12.22
  11.50
  10.85
  10.26
  9.74
  9.26
  8.84
  8.45
  8.11
  7.80
  7.52
  7.26
  7.04
  6.83
  6.65
  6.49
  6.34
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
Revenue, $m
  11,856
  13,753
  15,802
  18,000
  20,344
  22,829
  25,453
  28,214
  31,109
  34,138
  37,299
  40,595
  44,026
  47,595
  51,306
  55,162
  59,169
  63,334
  67,662
  72,163
  76,843
  81,713
  86,782
  92,061
  97,562
  103,296
  109,276
  115,517
  122,032
  128,836
  135,945
Variable operating expenses, $m
 
  10,407
  11,941
  13,586
  15,340
  17,200
  19,164
  21,231
  23,398
  25,665
  28,031
  30,385
  32,953
  35,625
  38,402
  41,288
  44,288
  47,405
  50,645
  54,013
  57,517
  61,162
  64,956
  68,907
  73,024
  77,316
  81,793
  86,464
  91,340
  96,433
  101,754
Fixed operating expenses, $m
 
  1,184
  1,213
  1,244
  1,275
  1,307
  1,339
  1,373
  1,407
  1,442
  1,478
  1,515
  1,553
  1,592
  1,632
  1,673
  1,715
  1,757
  1,801
  1,846
  1,893
  1,940
  1,988
  2,038
  2,089
  2,141
  2,195
  2,250
  2,306
  2,364
  2,423
Total operating expenses, $m
  10,116
  11,591
  13,154
  14,830
  16,615
  18,507
  20,503
  22,604
  24,805
  27,107
  29,509
  31,900
  34,506
  37,217
  40,034
  42,961
  46,003
  49,162
  52,446
  55,859
  59,410
  63,102
  66,944
  70,945
  75,113
  79,457
  83,988
  88,714
  93,646
  98,797
  104,177
Operating income, $m
  1,740
  2,162
  2,648
  3,171
  3,729
  4,322
  4,950
  5,610
  6,304
  7,031
  7,790
  8,694
  9,519
  10,378
  11,272
  12,201
  13,167
  14,171
  15,216
  16,303
  17,434
  18,611
  19,838
  21,116
  22,448
  23,838
  25,289
  26,803
  28,386
  30,039
  31,768
EBITDA, $m
  1,938
  2,399
  2,904
  3,446
  4,025
  4,641
  5,292
  5,978
  6,698
  7,452
  8,239
  9,061
  9,917
  10,808
  11,735
  12,699
  13,701
  14,743
  15,827
  16,955
  18,128
  19,349
  20,622
  21,947
  23,329
  24,771
  26,276
  27,847
  29,488
  31,203
  32,996
Interest expense (income), $m
  154
  96
  148
  204
  265
  330
  398
  470
  546
  626
  709
  797
  887
  982
  1,080
  1,182
  1,289
  1,399
  1,514
  1,633
  1,757
  1,886
  2,020
  2,160
  2,305
  2,456
  2,614
  2,779
  2,951
  3,130
  3,318
Earnings before tax, $m
  1,595
  2,067
  2,500
  2,966
  3,464
  3,993
  4,552
  5,140
  5,758
  6,405
  7,080
  7,898
  8,632
  9,396
  10,192
  11,018
  11,878
  12,772
  13,702
  14,670
  15,677
  16,726
  17,818
  18,956
  20,143
  21,382
  22,674
  24,024
  25,435
  26,909
  28,450
Tax expense, $m
  462
  558
  675
  801
  935
  1,078
  1,229
  1,388
  1,555
  1,729
  1,912
  2,132
  2,331
  2,537
  2,752
  2,975
  3,207
  3,449
  3,700
  3,961
  4,233
  4,516
  4,811
  5,118
  5,439
  5,773
  6,122
  6,487
  6,867
  7,265
  7,682
Net income, $m
  1,133
  1,509
  1,825
  2,165
  2,529
  2,915
  3,323
  3,752
  4,203
  4,675
  5,169
  5,765
  6,301
  6,859
  7,440
  8,043
  8,671
  9,324
  10,003
  10,709
  11,444
  12,210
  13,007
  13,838
  14,705
  15,609
  16,552
  17,538
  18,567
  19,643
  20,769

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  890
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  6,753
  6,802
  7,815
  8,902
  10,061
  11,290
  12,588
  13,954
  15,385
  16,883
  18,447
  20,077
  21,773
  23,539
  25,374
  27,281
  29,263
  31,322
  33,463
  35,689
  38,004
  40,412
  42,919
  45,530
  48,250
  51,086
  54,044
  57,130
  60,352
  63,717
  67,233
Adjusted assets (=assets-cash), $m
  5,863
  6,802
  7,815
  8,902
  10,061
  11,290
  12,588
  13,954
  15,385
  16,883
  18,447
  20,077
  21,773
  23,539
  25,374
  27,281
  29,263
  31,322
  33,463
  35,689
  38,004
  40,412
  42,919
  45,530
  48,250
  51,086
  54,044
  57,130
  60,352
  63,717
  67,233
Revenue / Adjusted assets
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
  2.022
Average production assets, $m
  1,324
  1,540
  1,770
  2,016
  2,278
  2,557
  2,851
  3,160
  3,484
  3,823
  4,178
  4,547
  4,931
  5,331
  5,746
  6,178
  6,627
  7,093
  7,578
  8,082
  8,606
  9,152
  9,720
  10,311
  10,927
  11,569
  12,239
  12,938
  13,668
  14,430
  15,226
Working capital, $m
  798
  756
  869
  990
  1,119
  1,256
  1,400
  1,552
  1,711
  1,878
  2,051
  2,233
  2,421
  2,618
  2,822
  3,034
  3,254
  3,483
  3,721
  3,969
  4,226
  4,494
  4,773
  5,063
  5,366
  5,681
  6,010
  6,353
  6,712
  7,086
  7,477
Total debt, $m
  1,953
  1,873
  2,588
  3,354
  4,171
  5,038
  5,953
  6,915
  7,925
  8,981
  10,083
  11,232
  12,428
  13,673
  14,966
  16,311
  17,708
  19,160
  20,669
  22,239
  23,870
  25,568
  27,336
  29,176
  31,094
  33,094
  35,179
  37,355
  39,626
  41,998
  44,477
Total liabilities, $m
  4,874
  4,795
  5,510
  6,276
  7,093
  7,960
  8,875
  9,837
  10,847
  11,903
  13,005
  14,154
  15,350
  16,595
  17,888
  19,233
  20,630
  22,082
  23,591
  25,161
  26,792
  28,490
  30,258
  32,098
  34,016
  36,016
  38,101
  40,277
  42,548
  44,920
  47,399
Total equity, $m
  1,878
  2,006
  2,305
  2,626
  2,968
  3,331
  3,714
  4,116
  4,539
  4,981
  5,442
  5,923
  6,423
  6,944
  7,485
  8,048
  8,633
  9,240
  9,872
  10,528
  11,211
  11,922
  12,661
  13,431
  14,234
  15,070
  15,943
  16,853
  17,804
  18,797
  19,834
Total liabilities and equity, $m
  6,752
  6,801
  7,815
  8,902
  10,061
  11,291
  12,589
  13,953
  15,386
  16,884
  18,447
  20,077
  21,773
  23,539
  25,373
  27,281
  29,263
  31,322
  33,463
  35,689
  38,003
  40,412
  42,919
  45,529
  48,250
  51,086
  54,044
  57,130
  60,352
  63,717
  67,233
Debt-to-equity ratio
  1.040
  0.930
  1.120
  1.280
  1.410
  1.510
  1.600
  1.680
  1.750
  1.800
  1.850
  1.900
  1.930
  1.970
  2.000
  2.030
  2.050
  2.070
  2.090
  2.110
  2.130
  2.140
  2.160
  2.170
  2.180
  2.200
  2.210
  2.220
  2.230
  2.230
  2.240
Adjusted equity ratio
  0.176
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295
  0.295

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,133
  1,509
  1,825
  2,165
  2,529
  2,915
  3,323
  3,752
  4,203
  4,675
  5,169
  5,765
  6,301
  6,859
  7,440
  8,043
  8,671
  9,324
  10,003
  10,709
  11,444
  12,210
  13,007
  13,838
  14,705
  15,609
  16,552
  17,538
  18,567
  19,643
  20,769
Depreciation, amort., depletion, $m
  198
  237
  255
  275
  296
  319
  343
  368
  394
  421
  450
  367
  398
  430
  463
  498
  534
  572
  611
  652
  694
  738
  784
  832
  881
  933
  987
  1,043
  1,102
  1,164
  1,228
Funds from operations, $m
  1,121
  1,746
  2,081
  2,441
  2,825
  3,234
  3,665
  4,120
  4,597
  5,096
  5,618
  6,132
  6,699
  7,289
  7,903
  8,542
  9,206
  9,896
  10,614
  11,361
  12,138
  12,948
  13,791
  14,670
  15,586
  16,542
  17,539
  18,581
  19,670
  20,807
  21,997
Change in working capital, $m
  -188
  104
  113
  121
  129
  137
  144
  152
  159
  167
  174
  181
  189
  196
  204
  212
  220
  229
  238
  248
  257
  268
  279
  290
  303
  315
  329
  343
  358
  374
  391
Cash from operations, $m
  1,309
  1,641
  1,968
  2,320
  2,696
  3,097
  3,521
  3,968
  4,438
  4,930
  5,444
  5,951
  6,510
  7,093
  7,699
  8,330
  8,985
  9,667
  10,376
  11,113
  11,881
  12,680
  13,512
  14,379
  15,283
  16,226
  17,210
  18,238
  19,311
  20,433
  21,606
Maintenance CAPEX, $m
  0
  -107
  -124
  -143
  -163
  -184
  -206
  -230
  -255
  -281
  -308
  -337
  -367
  -398
  -430
  -463
  -498
  -534
  -572
  -611
  -652
  -694
  -738
  -784
  -832
  -881
  -933
  -987
  -1,043
  -1,102
  -1,164
New CAPEX, $m
  -239
  -217
  -230
  -246
  -262
  -278
  -294
  -309
  -324
  -339
  -354
  -369
  -384
  -400
  -416
  -432
  -449
  -466
  -485
  -504
  -524
  -545
  -568
  -591
  -616
  -642
  -670
  -699
  -730
  -762
  -796
Cash from investing activities, $m
  -304
  -324
  -354
  -389
  -425
  -462
  -500
  -539
  -579
  -620
  -662
  -706
  -751
  -798
  -846
  -895
  -947
  -1,000
  -1,057
  -1,115
  -1,176
  -1,239
  -1,306
  -1,375
  -1,448
  -1,523
  -1,603
  -1,686
  -1,773
  -1,864
  -1,960
Free cash flow, $m
  1,005
  1,318
  1,614
  1,931
  2,271
  2,635
  3,021
  3,429
  3,859
  4,310
  4,782
  5,245
  5,759
  6,296
  6,854
  7,434
  8,038
  8,666
  9,319
  9,998
  10,705
  11,440
  12,206
  13,004
  13,836
  14,703
  15,608
  16,552
  17,538
  18,569
  19,646
Issuance/(repayment) of debt, $m
  -2
  661
  714
  766
  817
  867
  915
  963
  1,009
  1,056
  1,102
  1,149
  1,196
  1,244
  1,294
  1,345
  1,397
  1,452
  1,509
  1,569
  1,632
  1,698
  1,767
  1,841
  1,918
  1,999
  2,085
  2,176
  2,271
  2,372
  2,479
Issuance/(repurchase) of shares, $m
  87
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  5
  661
  714
  766
  817
  867
  915
  963
  1,009
  1,056
  1,102
  1,149
  1,196
  1,244
  1,294
  1,345
  1,397
  1,452
  1,509
  1,569
  1,632
  1,698
  1,767
  1,841
  1,918
  1,999
  2,085
  2,176
  2,271
  2,372
  2,479
Total cash flow (excl. dividends), $m
  996
  1,979
  2,329
  2,697
  3,088
  3,501
  3,936
  4,391
  4,868
  5,366
  5,884
  6,394
  6,956
  7,540
  8,147
  8,779
  9,435
  10,118
  10,828
  11,567
  12,337
  13,138
  13,974
  14,845
  15,754
  16,702
  17,693
  18,728
  19,810
  20,941
  22,125
Retained Cash Flow (-), $m
  -1,010
  -277
  -299
  -321
  -342
  -363
  -383
  -403
  -422
  -442
  -461
  -481
  -501
  -521
  -541
  -563
  -585
  -608
  -632
  -657
  -683
  -710
  -740
  -770
  -803
  -837
  -873
  -910
  -950
  -993
  -1,037
Prev. year cash balance distribution, $m
 
  149
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,850
  2,030
  2,377
  2,746
  3,139
  3,553
  3,989
  4,446
  4,924
  5,423
  5,913
  6,455
  7,019
  7,606
  8,216
  8,851
  9,510
  10,197
  10,911
  11,654
  12,428
  13,234
  14,075
  14,951
  15,866
  16,820
  17,817
  18,859
  19,948
  21,087
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,774
  1,858
  2,068
  2,261
  2,433
  2,578
  2,695
  2,779
  2,828
  2,843
  2,808
  2,755
  2,669
  2,553
  2,412
  2,249
  2,069
  1,878
  1,680
  1,481
  1,285
  1,098
  922
  761
  617
  491
  382
  292
  218
  159
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Sherwin-Williams Company (Sherwin-Williams) is engaged in the development, manufacture, distribution and sale of paint, coatings and related products. The Company's segments are Paint Stores Group, Consumer Group, Global Finishes Group, Latin America Coatings Group and Administrative. The Paint Stores Group markets and sells Sherwin-Williams branded architectural paint and coatings, protective and marine products, original equipment manufacturer (OEM) product finishes and related items. The Consumer Group segment manufactures and distributes a range of paint, coatings and related products. The Global Finishes Group develops, licenses and manufactures a range of protective and marine products, automotive finishes and refinish products, OEM product finishes and related products. The Latin America Coatings Group develops, licenses, manufactures and distributes a range of architectural paint and coatings, protective and marine products, OEM product finishes and related products.

FINANCIAL RATIOS  of  Sherwin-Williams (SHW)

Valuation Ratios
P/E Ratio 33.4
Price to Sales 3.2
Price to Book 20.2
Price to Tangible Book
Price to Cash Flow 28.9
Price to Free Cash Flow 35.4
Growth Rates
Sales Growth Rate 4.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 2.1%
Cap. Spend. - 3 Yr. Gr. Rate 7.4%
Financial Strength
Quick Ratio 1
Current Ratio 0.2
LT Debt to Equity 64.5%
Total Debt to Equity 104%
Interest Coverage 11
Management Effectiveness
Return On Assets 19.8%
Ret/ On Assets - 3 Yr. Avg. 18%
Return On Total Capital 34.1%
Ret/ On T. Cap. - 3 Yr. Avg. 33%
Return On Equity 82.5%
Return On Equity - 3 Yr. Avg. 86%
Asset Turnover 1.9
Profitability Ratios
Gross Margin 49.9%
Gross Margin - 3 Yr. Avg. 48.5%
EBITDA Margin 16.4%
EBITDA Margin - 3 Yr. Avg. 15.3%
Operating Margin 14.7%
Oper. Margin - 3 Yr. Avg. 13.5%
Pre-Tax Margin 13.5%
Pre-Tax Margin - 3 Yr. Avg. 12.8%
Net Profit Margin 9.6%
Net Profit Margin - 3 Yr. Avg. 8.9%
Effective Tax Rate 29%
Eff/ Tax Rate - 3 Yr. Avg. 30.7%
Payout Ratio 27.5%

SHW stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the SHW stock intrinsic value calculation we used $11856 million for the last fiscal year's total revenue generated by Sherwin-Williams. The default revenue input number comes from 2016 income statement of Sherwin-Williams. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our SHW stock valuation model: a) initial revenue growth rate of 16% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for SHW is calculated based on our internal credit rating of Sherwin-Williams, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Sherwin-Williams.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of SHW stock the variable cost ratio is equal to 75.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1155 million in the base year in the intrinsic value calculation for SHW stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 7.9% for Sherwin-Williams.

Corporate tax rate of 27% is the nominal tax rate for Sherwin-Williams. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the SHW stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for SHW are equal to 11.2%.

Life of production assets of 12.4 years is the average useful life of capital assets used in Sherwin-Williams operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for SHW is equal to 5.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1878 million for Sherwin-Williams - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 93.405 million for Sherwin-Williams is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Sherwin-Williams at the current share price and the inputted number of shares is $38.0 billion.

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Financial statements of SHW
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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