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Where next for the Sherwin-williams Co share price?

24th Nov '20 by Ben Hobson

Shares in Sherwin-williams Co (NYQ:SHW) are currently trading at 734.13 but a key question for investors is how the economic uncertainty caused by Covid-19 will affect the price in the months to come.

The answer comes down to judging whether Sherwin-williams Co is well placed to withstand economic shocks and ride out market volatility. To do that, it's worth looking at the profile of the stock to see where its strengths are.

Promisingly, it appears to score well against some important financial and technical measures. In particular, it has at least some exposure to two influential drivers of investment returns: high quality and strong momentum.

Decades of research shows that good quality stocks are more likely to be resilient, cash-generating businesses that can compound investment returns over time. Likewise, research suggests that positive trends in price and earnings can persist.

GET MORE DATA-DRIVEN INSIGHTS INTO NYQ:SHW »

Why quality stocks can pay off

When it comes to stock analysis, company quality tends to be revealed in high profitability and strong industry-leading margins. These kinds of firms are stable, growing and often have accelerating sales and earnings. They also have strong and improving financial histories with no obvious signs of accountancy or bankruptcy risk.

One of the quality metrics for Sherwin-williams Co is its 5-year Return on Capital Employed, which is 22.7%. Long-term, double-digit ROCEs can be a hallmark of companies with the power to grow very profitably.

Harnessing the power of momentum

Positive momentum trends show up in share prices and earnings growth. You can find the clues in stocks that are trading close to their 52 week high prices and outperforming the market. They’ll often be beating broker estimates and getting forecast upgrades and recommendation changes.

This is true at Sherwin-williams Co, where the share price has seen a 10.6% return relative to the market over the past 12 months. Market volatility and economic uncertainty can be a major drag on momentum, but previously strong stocks can be quick to recover when confidence returns.

In summary, good quality and momentum are pointers to some of the best stocks on the strongest uptrends. This combination of factors can be a clue to finding shares that can deliver solid investment profits over many years.

In good times, these shares can become expensive to buy. But in volatile markets, there may be chances to buy them at cheaper prices.

What does this mean for potential investors?

Finding good quality stocks with strong momentum behind them is a strategy used by some of the world's most successful investors. But be warned: these factors don't guarantee future returns and we've identified some areas of concern with Sherwin-williams Co that you can find out about here.

Alternatively, if you'd like to find more shares that are showing signs of having strong quality and momentum, just come and take a look at this High Quality & Momentum screen.

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Share Price
$265.6
Change Today
-0.49%
Sherwin-williams Co ( )

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