The home improvement industry is growing due to increased demand for home remodeling and technology advancements. So, quality home improvement stocks The Sherwin-Williams Company (SHW), Kingfisher plc (KGFHY), and Energizer Holdings, Inc. (ENR) could be wise additions to your portfolio now.
The Inflation Reduction Act may encourage households to embark on renovation projects by providing a variety of tax credits for installing solar panels and other energy-efficient equipment.
The Act’s updated and expanded 25C provision increased the credit range for qualified energy-efficient improvements completed during the year from 10% to 30% of the expenses, up to $3,200.
The global home remodeling market is expected to reach $1.32 trillion by 2030, growing at a CAGR of 4.3%. The home remodeling market is booming amid changing customer preferences, technology developments, and a healthy housing market.
Smart home automation systems have been gaining popularity, boosting the industry’s growth. Moreover, homeowners are increasingly prioritizing sustainability and energy efficiency in their remodeling projects leading to greater demand for energy-efficient appliances, eco-friendly materials, and renewable energy systems.
Let’s delve deeper into the fundamentals of the featured stocks.
The Sherwin-Williams Company (SHW)
SHW develops, manufactures, and distributes paints, coatings, and related products to its customers. It operates through three segments: The Americas Group; Consumer Brands Group; and Performance Coatings Group.
SHW’s trailing-12-month ROCE of 78.75% is 637.3% higher than the industry average of 10.68%. Its trailing-12-month ROTC of 12.74% is 109.4% higher than the industry average of 6.08%.
For the fiscal first quarter that ended March 31, 2023, SHW’s net sales increased 8.9% year-over-year to $5.44 billion, while its gross profit came in at $2.42 billion, up 17.9% year-over-year.
The company’s net income and adjusted EPS increased 28.7% and 26.7% year-over-year to $477.40 million and $2.04, respectively, for the same quarter.
The consensus revenue estimate of $22.79 billion for the year ending December 2024 represents a 3.6% increase year-over-year. Its EPS is expected to grow 14.2% year-over-year to $9.97 for the same period. It surpassed EPS estimates in three of four trailing quarters. SHW’s shares have gained 23.2% over the past nine months to close the last trading session at $264.13.
SHW’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SHW has a B for Growth, Sentiment, and Quality. Within the B-rated Home Improvement & Goods industry, it is ranked #13 out of 57 stocks. Click here for the additional POWR Ratings for Value, Momentum, and Stability for SHW.
Kingfisher plc (KGFHY)
Headquartered in London, the United Kingdom, KGFHY, together with its subsidiaries, supplies home improvement products and services primarily in the United Kingdom, Ireland, France, and internationally.
KGFHY’s forward EV/Sales multiple of 0.52 is 55.7% lower than the industry average of 1.17. Its forward Price/Sales multiple of 0.34 is 61.5% lower than the industry average of 0.89.
KGFHY’s trailing-12-month ROTA and CAPEX / Sales of 3.89% and 3.44% are 6.9% and 7.6% higher than the industry averages of 3.64% and 3.20%, respectively.
KGFHY’s total current liabilities came in at £2.90 billion ($3.68 billion) for the period that ended January 31, 2023, compared to £3.12 billion ($3.96 billion) for the period that ended December 31, 2022. Also, its total liabilities came in at £5.44 billion ($6.91 billion), compared to £5.57 billion ($7.08 billion) in the same period.
Street expects KGFHY’s revenue to increase 3.9% year-over-year to $16.58 billion for the year ending January 2024. Its EPS is expected to come in at $0.59 for the same period. Over the past nine months, the stock has gained 16.8% to close the last trading session at $5.91.
It’s no surprise that KGFHY has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Stability, Value, and Momentum. It is ranked #17 in the same industry.
Beyond what is stated above, we’ve also rated KGFHY for Growth, Sentiment, and Quality. Get all KGFHY ratings here.
Energizer Holdings, Inc. (ENR)
ENR, together with its subsidiaries, manufactures, markets, and distributes household batteries, specialty batteries, and lighting products worldwide.
ENR’s trailing-12-month EV/EBIT multiple of 12.26 is 21.6% lower than the industry average of 15.64. Its trailing-12-month Price/Sales multiple of 0.81 is 24.5% lower than the industry average of 1.07.
ENR’s trailing-12-month levered FCF margin of 7.93% is 166% higher than the industry average of 2.98%. Its trailing-12-month EBIT margin of 14.77% is 121.5% higher than the industry average of 6.67%.
In the fiscal second quarter that ended March 31, 2023, ENR’s gross profit increased 6.3% year-over-year to $253.30 million. Its adjusted EBITDA came in at $139.50 million, up 21.7% year-over-year. Also, its adjusted net earnings and EPS increased 39.6% and 36.2% year-over-year to $46.5 million and $0.64, respectively.
Analysts expect ENR’s revenue to increase marginally year-over-year to $3.08 billion for the year ending September 2024. Its EPS is expected to grow 8.1% year-over-year to $3.42 for the same period. It surpassed EPS estimates in all four trailing quarters. The stock has gained 30.8% over the past nine months to close the last trading session at $34.08.
ENR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #14 in the same industry. To see additional ENR’s ratings for Value, Stability, Sentiment, Momentum, Growth, and Quality, click here.
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SHW shares were unchanged in premarket trading Tuesday. Year-to-date, SHW has gained 11.89%, versus a 16.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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