Sherwin-Williams Co. (NYSE:SHW)

Goodwill

The goodwill balance displayed a consistent upward trend from 7,049,100 thousand USD in 2020 to a peak of 7,626,000 thousand USD in 2023, followed by a slight decline to 7,580,100 thousand USD in 2024. This suggests selective acquisitions or revaluations during the period with a marginal reduction at the end of the timeframe.

Software

Software assets saw moderate fluctuations, starting at 166,800 thousand USD in 2020, dipping to 158,200 thousand USD in 2023, before increasing to 185,000 thousand USD in 2024. This indicates some reinvestment or capitalization in software assets after a period of mild decline.

Customer Relationships

This intangible asset category decreased from 3,181,600 thousand USD in 2020 to 3,005,700 thousand USD in 2021, recovered to 3,263,400 thousand USD in 2023, then slightly declined again to 3,187,800 thousand USD in 2024. The movements suggest some amortization or divestitures mitigated by strategic acquisitions or reassessments contributing to occasional increases.

Intellectual Property

Intellectual property remained relatively stable at around 1,730,000 thousand USD from 2020 through 2022, with a noticeable increase to 1,968,500 thousand USD in 2023 and slight growth to 1,973,000 thousand USD in 2024. This upward movement indicates potential development or acquisition of intellectual property assets late in the period.

All Other Intangible Assets

Assets classified as "All other" showed volatility with values ranging from 303,500 thousand USD in 2021, spiking to 427,500 thousand USD in 2022, dropping substantially to 232,600 thousand USD in 2023, and marginally declining further to 225,800 thousand USD in 2024. This category appears subject to irregular activity or varying classifications.

Finite-lived Intangible Assets (Gross)

Gross finite-lived intangible assets decreased from 5,385,500 thousand USD in 2020 to 5,205,500 thousand USD in 2021, rebounded to 5,621,700 thousand USD in 2023 before a slight decrease to 5,571,600 thousand USD in 2024. The trend highlights some asset additions following initial reductions.

Accumulated Amortization

Accumulated amortization steadily increased in magnitude (more negative) from -1,530,900 thousand USD in 2020 to -2,546,300 thousand USD in 2024, reflecting continued amortization expenses over the years which reduce net intangible asset values.

Finite-lived Intangible Assets (Net)

Net finite-lived intangible assets declined consistently from 3,854,600 thousand USD in 2020 down to 3,025,300 thousand USD in 2024, driven principally by rising amortization despite some gross asset additions. This trend shows diminishing value of these assets on the balance sheet over time.

Trademarks with Indefinite Lives

Trademarks with indefinite lives decreased steadily from 616,600 thousand USD in 2020 to 507,900 thousand USD in 2024, indicating possible impairments or reclassifications as no amortization applies to such assets.

Intangible Assets (Total)

Total intangible assets decreased from 4,471,200 thousand USD in 2020 to 3,533,200 thousand USD in 2024, reflecting net declines in finite-lived assets and trademarks over the period, with only minor offsetting increases in certain categories such as intellectual property.

Goodwill and Intangible Assets (Aggregate)

The combined balance of goodwill and intangible assets showed a downward trend from 11,520,300 thousand USD in 2020 to 11,113,300 thousand USD in 2024, with a peak in 2022 at 11,585,200 thousand USD. This suggests a general contraction in the net carrying values of these non-current assets despite some fluctuations.

The total assets reported increased steadily over the five-year period from December 31, 2020, to December 31, 2024. The amount rose from approximately $20.4 billion in 2020 to about $23.6 billion in 2024, representing a moderate but consistent growth trend. Similarly, when adjusted for goodwill, total assets also showed an upward trend, increasing from $13.35 billion in 2020 to approximately $16.05 billion in 2024. This suggests underlying asset growth beyond intangible goodwill adjustments.

Reported shareholders’ equity displayed more volatility within the same timeframe. It declined notably from $3.61 billion in 2020 to $2.44 billion in 2021 but then recovered steadily to reach $4.05 billion in 2024, a level higher than the initial figure in 2020. This fluctuation may indicate changes in retained earnings, dividends, share buybacks, or other equity-related transactions occurring during 2021, followed by a consistent strengthening of equity thereafter.

In contrast, adjusted shareholders’ equity, which accounts for goodwill impairments or other intangible asset adjustments, was negative throughout all years analyzed. It declined further from -$3.44 billion in 2020 to -$4.70 billion in 2021, then slightly improved but remained deeply negative through 2024, ending at around -$3.53 billion. This persistent negative adjusted equity suggests that intangible assets, such as goodwill, significantly impact the book value of equity when excluded, potentially signaling impairments or overvaluation of intangible assets relative to reported equity.

Overall, the reported data depicts growth in asset size and a rebounding equity position after a significant dip in 2021. The adjusted data highlights potential risks related to asset quality and valuation, with substantial negative equity adjustments persisting through the years. These contrast patterns provide insight into the company’s balance sheet composition and the material effect of intangible assets on financial position assessments.

Total Assets (Reported and Adjusted)

Both measures increase consistently, indicating asset base expansion.

Shareholders’ Equity (Reported)

Notable decline in 2021 followed by steady growth, ending above 2020 levels.

Shareholders’ Equity (Adjusted)

Persistently negative values indicate that excluding goodwill and intangibles leaves equity in deficit, suggesting significant intangible asset adjustments.

Total Asset Turnover

The reported total asset turnover ratio shows a gradual increase from 0.9 in 2020 to a peak of 1.0 in 2023, followed by a slight decline to 0.98 in 2024. The adjusted total asset turnover ratio, which likely excludes goodwill, consistently remains higher than the reported figures. It rises steadily from 1.38 in 2020 to 1.5 in 2023, then slightly decreases to 1.44 in 2024. This suggests improved efficiency in asset utilization when adjusted for intangible assets such as goodwill.

Financial Leverage

The reported financial leverage ratio exhibits notable volatility over the observed period. It peaks at 8.48 in 2021, indicating increased reliance on debt or liabilities, then declines progressively to 5.83 by 2024. The absence of adjusted financial leverage data limits insights into leverage trends excluding goodwill; however, the downward trend in reported leverage reflects a potential deleveraging strategy or improved equity base over time.

Return on Equity (ROE)

The reported ROE demonstrates significant fluctuations. It rises sharply from 56.23% in 2020 to a peak of 76.5% in 2021, followed by a decline to around 64% in 2023, with a slight recovery to 66.19% in 2024. This pattern may indicate variable profitability and financial efficiency. The lack of adjusted ROE data precludes a comparative analysis that excludes goodwill effects.

Return on Assets (ROA)

The reported ROA shows a moderate decline from 9.95% in 2020 to 8.94% in 2022, then rises markedly to 11.35% by 2024. Adjusted ROA consistently exceeds reported figures, reflecting the exclusion of goodwill's impact. Adjusted ROA trends mirror the reported pattern, declining slightly early in the period before improving substantially to 16.7% in 2024. This indicates enhanced overall asset profitability when intangible assets are adjusted.

Overall Insights

The data reveal improved asset efficiency and profitability over the years, particularly when adjusted for goodwill. The total asset turnover and ROA improvements suggest enhanced operational performance and asset management. The decreasing financial leverage points to a reduced dependency on debt financing, potentially lowering financial risk. The fluctuations in reported ROE suggest variability in earnings relative to equity, warranting further investigation to identify underlying causes. The absence of adjusted leverage and ROE data limits the ability to fully assess the impact of goodwill on financial structure and equity returns.

Total Assets

The reported total assets showed a general upward trend, increasing steadily from 20,401,600 thousand US dollars in 2020 to 23,632,600 thousand US dollars in 2024. This represents a consistent growth in asset base over the five-year period. Similarly, the adjusted total assets, which account for goodwill adjustments, also exhibited growth from 13,352,500 thousand US dollars in 2020 to 16,052,500 thousand US dollars in 2024, reflecting an expanding asset base after adjustments.

Total Asset Turnover

The reported total asset turnover ratio improved from 0.9 in 2020 to a peak of 1.0 in 2023, before slightly declining to 0.98 in 2024. This indicates a gradual increase in efficiency in utilizing assets to generate revenue, though there was a minor decrease in the last period. The adjusted total asset turnover showed a stronger performance, increasing from 1.38 in 2020 to a peak of 1.5 in 2023, then declining marginally to 1.44 in 2024. This higher ratio compared to the reported turnover suggests that after adjusting for goodwill, the company’s asset efficiency is notably better.

Insights

Overall, the asset growth indicates ongoing investment or acquisition activity, while the increase in total asset turnover ratios suggests improved operational efficiency over the observed period. The adjusted figures highlight the impact of goodwill on asset base and emphasize that the company is able to generate relatively higher revenue per adjusted asset unit. The slight decrease in turnover in 2024 may warrant further analysis to determine underlying factors.

The data reveals trends in both reported and goodwill-adjusted financial metrics over a five-year period. Total assets, both reported and adjusted, generally exhibit an upward trend. Reported total assets increase steadily from approximately $20.4 billion in 2020 to around $23.6 billion in 2024. Adjusted total assets, which exclude goodwill, also grow over the same period, rising from about $13.4 billion to roughly $16.1 billion. This suggests continued asset accumulation with a consistent portion attributable to goodwill.

Reported shareholders’ equity shows some volatility within the timeframe. It declines sharply from about $3.6 billion in 2020 to approximately $2.4 billion in 2021, after which it rises again in subsequent years, reaching over $4.0 billion by 2024. Conversely, adjusted shareholders’ equity figures are negative throughout the period, fluctuating between approximately -$3.4 billion and -$4.7 billion before trending upward slightly to nearly -$3.5 billion in 2024. The persistent negative adjusted equity indicates significant goodwill or intangible assets affecting the equity base.

Reported financial leverage ratios experience notable changes over the years. Starting at 5.65 in 2020, leverage peaks at 8.48 in 2021, reflecting increased debt relative to equity during that year. Thereafter, leverage steadily declines to 5.83 by 2024, indicating a reduction in reliance on debt financing relative to reported equity. Adjusted financial leverage data is absent, preventing a direct comparison with reported figures on a goodwill-adjusted basis.

Total Assets

Both reported and adjusted total assets increased steadily over the five years, indicating asset growth. The gap between reported and adjusted assets suggests a sizable goodwill component.

Shareholders’ Equity

Reported equity displayed volatility with a dip in 2021 but improved in subsequent years. Adjusted equity remained negative throughout, implying significant goodwill or intangible assets overshadowing tangible equity.

Financial Leverage

The reported leverage ratio spiked in 2021 but decreased thereafter, showing a transition from higher to lower leverage. Lack of adjusted leverage data limits further analysis in this aspect.

Shareholders’ Equity Trends

The reported shareholders' equity experienced a noticeable decline from 3,610,800 thousand US dollars at the end of 2020 to 2,437,200 thousand US dollars in 2021. This was followed by a steady recovery and increase over the subsequent years, reaching 4,051,200 thousand US dollars by the end of 2024. This pattern indicates an initial contraction in equity followed by a phase of growth and improved financial standing.

In contrast, the adjusted shareholders' equity, which presumably accounts for goodwill and other adjustments, remained negative across all periods. It declined further from -3,438,300 thousand US dollars in 2020 to a low of -4,697,400 thousand US dollars in 2021 before gradually improving to -3,528,900 thousand US dollars by 2024. This persistent negative adjusted equity suggests ongoing challenges related to intangibles or other balance sheet adjustments impacting the net equity base.

Return on Equity (ROE) Insights

The reported ROE showed high values throughout the period, starting at 56.23% in 2020 and peaking at 76.5% in 2021. After this peak, it declined modestly to 65.12% in 2022 and remained relatively stable around the mid-60s percentage level through 2023 and 2024. These elevated ROE figures indicate strong profitability relative to reported equity, although the sharp spike in 2021 and subsequent normalization suggest some volatility or exceptional performance factors during that year.

No values were provided for adjusted ROE, which restricts the ability to assess profitability on a goodwill-adjusted equity basis.

Overall Observations

The disparity between reported and adjusted shareholders’ equity suggests significant goodwill or intangible asset impacts on the equity base. While reported equity shows a recovery and growth trajectory after a drop in 2021, the adjusted equity remains negative, signaling underlying asset valuation or impairment considerations.

Lastly, the reported ROE's high percentages, particularly in 2021, imply strong returns on shareholders’ capital despite the dip in reported equity that year. This combination of trends points to operational efficiency or profitability that may not fully align with the adjusted equity valuation, underscoring the importance of considering goodwill adjustments for a complete financial assessment.

An analysis of the financial data over the five-year period reveals several notable trends and patterns regarding the company's total assets and return on assets (ROA) both on a reported and goodwill-adjusted basis.

Total Assets

The reported total assets demonstrate a consistent upward trajectory from approximately 20.4 billion US dollars in 2020 to about 23.6 billion US dollars in 2024. This indicates steady growth in the asset base, with notable increments each year, particularly between 2021 and 2022 where the increase was more pronounced.

The adjusted total assets, which exclude goodwill, also reflect a similar increasing pattern, rising from roughly 13.35 billion in 2020 to approximately 16.05 billion in 2024. This trend suggests growth in tangible and other intangible assets excluding goodwill, albeit at a slower pace than the reported total assets. The difference between reported and adjusted assets highlights the significant contribution of goodwill to the total asset valuation.

Return on Assets (ROA)

The reported ROA shows a decline from 9.95% in 2020 to 8.94% in 2022, followed by a recovery to 11.35% in 2024. This pattern indicates a dip in asset profitability during the middle years, with a strong improvement in the most recent periods. The initial decline may reflect increased asset base or operational challenges, while the subsequent rise suggests enhanced operational efficiency or profitability.

The adjusted ROA, calculated excluding goodwill, mirrors this trend but at consistently higher levels, starting at 15.21% in 2020 and gradually decreasing to 13.46% in 2022 before rebounding to 16.7% in 2024. The higher adjusted ROA compared to reported ROA implies that goodwill may be diluting the apparent asset returns when included in the total asset base. The adjusted ROA's pattern underscores improvement in core asset profitability, especially in the latter years.

Overall, the data suggests a growing asset base accompanied by fluctuations in asset profitability, with a recent marked improvement. The distinction between reported and adjusted figures highlights the impact of goodwill on asset measurements and performance ratios, reinforcing the importance of analyzing adjusted metrics for a clearer view of operational efficiency.