One of the least expensive home improvement projects is a fresh coat of paint. And with demand for home improvement proving to be less cyclical than in the past, Izet Elmazi – senior portfolio manager with Bristol Gate Capital Partners in Toronto – thinks Sherwin-Williams (SHW, $512.95) is the right stock for stability and growth.
Sherwin-Williams is a global leader in making and selling paints, coatings and other similar products. Elmazi believes the company is financially sound thanks to high free cash flow generation and an improving balance sheet. SHW has generated $17.7 billion in revenue over the past 12 months with 43% gross margins.
Remodeling and refurbishment drive the bulk of its demand, and the company has ample pricing power. Sherwin-Williams should be a survivor, then, even in a consolidating industry.
“If our thesis is right, this is just the beginning as gross margins trend back towards 50% over time and organic growth accelerates from here,” Elmazi says. “Demand for its products are still not at previous cycle highs. How many things can you say that for?”
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By Michael Kahn, Contributing Writer | August 2, 2019, Kiplinger