Sherwin downgraded at BMO - the good news is already in the share price

Jan. 04, 2022 8:55 AM ETSHWBy: SA News Team2 Comments

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  • Putting a 23x multiple on 2023 EBITDA, with 2023 EBITDA being 30% above 2021 EBITDA, gets BMO ~10% upside in Sherwin (NYSE:SHW) shares from here; the analyst downgrades to hold.
  • In 2021, 5% EPS growth led the shares to appreciate 41%, as investor concerns about the supply chain never fully materialized says BMO's John McNulty.
  • Though BMO is above street profit forecasts for 2023 by 15%, the earnings multiple the shares trade at appears rich, and could compress in a rising interest rate environment.
  • Taken together, this valuation downgrade follows the shares more than doubling from pandemic lows on solid execution, suggesting analysts will buy the dip if-and-when shares offer some valuation upside.

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