An insider buying their company's shares is often seen as a strong indicator of that stock's future prospects. This is because insiders - a group that includes a company's officers and directors, as well as any shareholders with a stake of 10% or more - are often better informed than the general investing public about the specific operational functions and future strategic plans of the company.
Insider buying and selling activity can be accessed through publicly available Form 4 filings, and the most significant transactions tend to be those made in higher dollar amounts by top executives. With this in mind, here's a look at one stock that just landed an investment of over half a million dollars from its own CEO.
About Sherwin Williams
Founded in 1866 and based out of Cleveland, OH, Sherwin Williams has been a leading paints player in the U.S. and globally for years. The company is a top global manufacturer, distributor, and retailer of paints, coatings, and related products and services for professional, industrial, commercial, and retail customers. With more than 5,000 stores in North America and South America, Sherwin-Williams also has a presence in Europe, Asia, and the Middle East.
Commanding a market cap of $60.26 billion, Sherwin Williams stock is nearly flat on a YTD basis.
Sherwin Williams offers a dividend yield of 1.02%. Even though that's below the sector median of 1.64%, the company has raised its dividend for a remarkable 44 years - giving it the prestigious status of a “Dividend Aristocrat.”
CEO Morikis Makes a Sizeable Purchase
John G. Morikis, the Chairman and CEO of Sherwin Williams, recently purchased shares worth more than $500,000. To be precise, he bought 2,125 shares of the company on Oct. 25, at an average price of $237.59. Following this transaction, Morikis now holds 423,338 shares to bring his SHW stake to 0.16%.
Looking at past insider buys on the company, Morikis previously bought shares of SHW in two separate transactions, also in the neighborhood of 2,000 shares each for approximately half a million per purchase. The average share price on those two buys, recorded in January 2023 and February 2022, were $226.70 and $259.55, respectively.
Taking a closer look, there are a few reasons why the CEO might have wanted to buy the latest dip on SHW.
Consistent Earnings Growth
Over the last five quarters, Sherwin Williams has not only displayed consistent annual EPS growth, but it has managed to surpass consensus bottom-line expectations each time. In its latest results for the third quarter, the company reported EPS of $3.20, up 13.1% from the year-ago period and above the consensus estimate of $2.78.
Net sales rose 1.1% to $6.12 billion, as the company cited variable demand in its end-markets as the cause for the slower growth. Meanwhile, the company increased its store count to 4,660 paint stores from 4,585 in the year-ago period.
Looking ahead, SHW's forward revenue growth is pegged at nearly 6%, with long-term EPS growth above 10% - both well above their respective sector medians.
Strong Brand & Pricing Power
Sherwin Williams' preeminent position in the paints space is well-established. According to Brand Finance's report, Sherwin Williams is the most valuable global paints brand, with PPG occupying a distant second position. This high brand value stems from the broad acceptance of SHW's products among both DIY painters and professional customers.
This brand strength and loyalty has helped SHW pass along cost inflation to its customers in the current environment, without pressuring its market share.
Analysts Expect More Upside
Overall, analysts have a “Moderate Buy” rating on the stock, with a mean target price of $293.53. This represents an upside potential of 22% from current levels.
Out of 21 analysts covering SHW, 13 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 6 have a “Hold” rating, and 1 has a “Moderate Sell” rating.
