Critical Analysis: Axalta Coating Systems (AXTA) vs. Sherwin-Williams (SHW)

Axalta Coating Systems (NYSE: AXTA) and Sherwin-Williams (NYSE:SHW) are both mid-cap basic materials companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, profitability, institutional ownership, earnings, dividends and analyst recommendations.

Profitability

This table compares Axalta Coating Systems and Sherwin-Williams’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Axalta Coating Systems 1.46% 19.91% 4.30%
Sherwin-Williams 7.82% 58.02% 9.53%

Earnings & Valuation

This table compares Axalta Coating Systems and Sherwin-Williams’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Axalta Coating Systems $4.07 billion 2.17 $41.80 million $0.29 124.86
Sherwin-Williams $11.86 billion 3.11 $1.13 billion $11.37 34.66

Sherwin-Williams has higher revenue and earnings than Axalta Coating Systems. Sherwin-Williams is trading at a lower price-to-earnings ratio than Axalta Coating Systems, indicating that it is currently the more affordable of the two stocks.

Dividends

Sherwin-Williams pays an annual dividend of $3.40 per share and has a dividend yield of 0.9%. Axalta Coating Systems does not pay a dividend. Sherwin-Williams pays out 29.9% of its earnings in the form of a dividend. Sherwin-Williams has raised its dividend for 38 consecutive years.

Insider and Institutional Ownership

96.9% of Axalta Coating Systems shares are held by institutional investors. Comparatively, 73.6% of Sherwin-Williams shares are held by institutional investors. 2.3% of Axalta Coating Systems shares are held by company insiders. Comparatively, 1.7% of Sherwin-Williams shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Axalta Coating Systems and Sherwin-Williams, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Axalta Coating Systems 1 6 9 0 2.50
Sherwin-Williams 0 5 12 0 2.71

Axalta Coating Systems currently has a consensus target price of $33.64, indicating a potential downside of 7.09%. Sherwin-Williams has a consensus target price of $404.88, indicating a potential upside of 2.75%. Given Sherwin-Williams’ stronger consensus rating and higher possible upside, analysts plainly believe Sherwin-Williams is more favorable than Axalta Coating Systems.

Summary

Sherwin-Williams beats Axalta Coating Systems on 12 of the 16 factors compared between the two stocks.

About Axalta Coating Systems

Axalta Coating Systems Ltd. is a holding company. The Company is a manufacturer, marketer and distributor of coatings systems primarily serving the transportation industry. The Company’s segments include Performance Coatings and Transportation Coatings. Through its Performance Coatings segment, the Company provides liquid and powder coatings solutions to a fragmented and local customer base. Through its Transportation Coatings segment, the Company provides coating technologies to original equipment manufacturers (OEMs) of light and commercial vehicles. The Performance Coatings segment serves various end markets, including refinish and industrial. The Company develops, markets and supplies a portfolio of coatings systems and color matching technologies. The Company also develops and supplies an array of coatings systems for a range of commercial applications, including heavy-duty truck (HDT), bus, rail and agricultural construction equipment (ACE).

About Sherwin-Williams

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.

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