Investment Thesis
Sherwin Williams exhibits deteriorating financial health with declining net income (-4.2% YoY) despite flat revenue growth, signaling margin compression and operational stress. The company carries excessive leverage (2.10x debt-to-equity) while generating virtually no free cash flow ($800K on $5.7B revenue), creating acute financial vulnerability with sub-1.0 current ratio and low 1.7x interest coverage.
Strengths
- Solid gross margin of 49.1% demonstrates pricing power and manufacturing efficiency
- $5.7B revenue base provides scale and established market position in building materials retail
- Positive operating cash flow of $139.1M demonstrates ongoing operational viability
Risks
- Declining profitability with net income down 4.2% YoY and EPS down 2.7% despite flat revenue growth indicates margin compression
- Excessive leverage at 2.10x debt-to-equity with only 1.7x interest coverage provides minimal debt service flexibility and refinancing risk
- Critical liquidity crisis: current ratio of 0.86x and quick ratio of 0.53x indicate inability to cover current liabilities; potential covenant violation risk
- Virtually zero free cash flow ($800K) after capex on $5.7B revenue severely limits debt reduction and strategic investment capacity
Key Metrics to Watch
- Free cash flow generation and debt repayment trajectory
- Current ratio and liquidity coverage ratios for covenant compliance
- Net income and operating margin trends amid revenue stagnation
- Debt refinancing terms and access to capital markets
Financial Metrics
Revenue
5.7B
Net Income
534.7M
EPS (Diluted)
$2.15
Free Cash Flow
800.0K
Total Assets
26.4B
Cash
216.9M
Profitability Ratios
Gross Margin
49.1%
Operating Margin
12.0%
Net Margin
9.4%
ROE
12.1%
ROA
2.0%
FCF Margin
0.0%
Balance Sheet & Liquidity
Current Ratio
0.86x
Quick Ratio
0.53x
Debt/Equity
2.10x
Debt/Assets
0.0%
Interest Coverage
1.72x
Long-term Debt
9.3B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T13:52:52.181076 |
Data as of: 2026-03-31 |
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