The Sherwin-Williams CompanySHWNYSE

Overview Intelligence Charts News Fundamentals DCF Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Sell

Fair Value: $194.72 per share(market-calibrated)

-47.1%

Upside to Fair Value

Current

$367.94

Pure Model

$136.99

Fair Value

$194.72

Bull Case

$173.27

Bear Case

$102.95

Market Reality Check

Model Terminal Growth

2.25%

Market-Implied Growth

Unreachable

Calibrated Growth

75/25 blend

Market price implies assumptions beyond model range. Fair value blends 75% model / 25% market price.

What's Driving This Ratingfor SHW

✓

CapEx already efficient

CapEx at 2.78% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 14.91% — below the sector mature average of 16.14%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $4.8B (14.91% margin).

→

Moderate revenue growth

Analyst consensus projects 4.20% revenue growth, fading to 2.25% by Year 10. Revenue reaches $32.3B (vs $23.6B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $115.83/share (15.0x terminal FCF) while exit multiple gives $158.15/share (21.9x terminal FCF). The 14x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 2.25% growth is more conservative. The base case averages both methods.

⚠

Market price exceeds model's maximum

Even with the most optimistic terminal growth the model allows, it can't reach $367.94. The market is pricing in factors beyond the DCF framework — possibly optionality, brand premium, or expectations of margin/growth inflection not yet in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 63.95% indicates efficient cash generation. FCF reaches $3.6B by Year 10 (11.15% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.26

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.17%

Cost of Debt

Pre-tax Cost of Debt2.86%

Tax Rate23.06%

After-tax Cost of Debt2.20%

Equity Weight (E/V)86.18%

Debt Weight (D/V)13.82%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (86.18% × 10.17%) + (13.82% × 2.20%)

= 9.07%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$24.6B	$27.0B	$28.9B	$30.2B	$32.3B
EBIT	$3.7B	$4.0B	$4.3B	$4.5B	$4.8B
Tax	$844M	$929M	$994M	$1.0B	$1.1B
NOPAT	$2.8B	$3.1B	$3.3B	$3.5B	$3.7B
+ Depreciation	$621M	$684M	$732M	$765M	$818M
- Capex	$683M	$752M	$805M	$841M	$899M
- Δ NWC	$30M	$41M	$19M	$20M	$21M
Free Cash Flow	$2.7B	$3.0B	$3.2B	$3.4B	$3.6B
Discount Factor	0.917	0.771	0.648	0.545	0.420
Present Value	$2.5B	$2.3B	$2.1B	$1.8B	$1.5B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$3.6B

Terminal Growth Rate2.25%

WACC9.07%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$54.1B

PV of Terminal Value$22.7B

Exit Multiple Method

Year 10 EBITDA$5.6B

Exit Multiple (EV/EBITDA)14.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$78.9B

PV of Terminal Value$33.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$20.2B

PV of Terminal Value$22.7B

Enterprise Value$42.9B

(-) Net Debt$14.3B

Equity Value$28.5B

Shares Outstanding246M

Price per Share$115.83

Exit Multiple Method

PV of Projected FCFs$20.2B

PV of Terminal Value$33.1B

Enterprise Value$53.3B

(-) Net Debt$14.3B

Equity Value$39.0B

Shares Outstanding246M

Price per Share$158.15

Pure Model Fair Value

$136.99

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.25%	1.75%	2.25%	2.75%	3.25%
7.07%	$177.05	$183.45	$191.18	$200.71	$212.72
8.07%	$151.34	$155.57	$160.53	$166.41	$173.53
9.07%	$130.70	$133.63	$136.99	$140.88	$145.44
10.07%	$113.59	$115.69	$118.06	$120.76	$123.86
11.07%	$99.09	$100.64	$102.37	$104.31	$106.50

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$102.95

-72.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.57

Base Case

$136.99

-62.8% vs current

• Analyst consensus
• Terminal growth: 2.3%
• Beta: 1.26

Bull Case

$173.27

-52.9% vs current

• +25% vs analyst consensus
• Terminal growth: 2.8%
• Beta: 1.07

Key Assumptions & Drivers• Basic Materials Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth4.20%

Year 3 Revenue Growth5.22%

Year 5 Revenue Growth2.25%

Year 7 Revenue Growth2.25%

Year 10 Revenue Growth2.25%

Terminal Growth Rate2.25%

Margin & Efficiency

Current EBIT Margin14.91%

Terminal EBIT Margin16.14%

Tax Rate23.06%

Historical Capex / Rev2.78%

NWC / Revenue3.02%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 14x EV/EBITDA (Basic Materials sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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