Sherwin-Williams Co. (NYSE:SHW)

The combined value of goodwill and intangible assets exhibited an initial increase followed by a decline and subsequent recovery over the observed period. From 2021 to 2022, the total increased from US$11,136.1 million to US$11,585.2 million, then decreased to US$11,113.3 million by 2024 before rising again to US$12,002.7 million in 2025. A detailed examination of the components reveals differing trends.

Goodwill

Goodwill experienced a moderate increase from US$7,134.6 million in 2021 to US$7,626.0 million in 2023. A slight decrease was noted in 2024 to US$7,580.1 million, followed by a more substantial increase to US$8,036.6 million in 2025. This suggests potential acquisitions or revaluations impacting goodwill in the later years of the period.

Finite-Lived Intangible Assets

Gross finite-lived intangible assets generally increased from US$5,205.5 million in 2021 to US$5,622.7 million in 2023, then decreased to US$5,571.6 million in 2024, and finally increased to US$6,117.6 million in 2025. The net value of these assets, after accounting for accumulated amortization, showed a different pattern. It increased modestly from US$3,418.4 million in 2021 to US$3,445.8 million in 2022, then declined consistently to US$3,025.3 million in 2024 before a partial recovery to US$3,172.2 million in 2025. The increasing accumulated amortization, rising from US$-1,787.1 million in 2021 to US$-2,945.4 million in 2025, is a significant factor in the net value trend.

Specific Intangible Asset Components

Customer relationships demonstrated consistent growth, increasing from US$3,005.7 million in 2021 to US$3,654.9 million in 2025. Intellectual property also showed an upward trend, rising from US$1,730.3 million to US$2,002.3 million over the same period. Software experienced fluctuations, with a decrease in 2023, but ultimately reaching US$231.1 million in 2025, higher than its 2021 value. “All other” intangible assets were volatile, peaking at US$427.5 million in 2022 before declining to US$229.3 million in 2025.

Indefinite-Lived Trademarks

Trademarks with indefinite lives decreased from US$583.1 million in 2021 to US$507.9 million in 2024, then experienced a substantial increase to US$793.9 million in 2025. This significant jump in 2025 warrants further investigation to understand the underlying cause, potentially related to brand strengthening or revaluation.

Overall, the composition of goodwill and intangible assets shifted over the period. While goodwill remained the largest component, the growth in customer relationships and intellectual property suggests a potential emphasis on internally developed or acquired intangible assets with defined useful lives. The increasing amortization expense indicates a continued consumption of these finite-lived assets, while the late-period increase in indefinite-lived trademarks is a notable development.

The information presents a comparison between reported and adjusted financial figures for total assets and shareholders’ equity over a five-year period. The adjustments appear to relate to the removal of goodwill and intangible assets, resulting in significant differences between the reported and adjusted values.

Total Assets

Reported total assets demonstrate a consistent upward trend, increasing from US$20,666,700 thousand in 2021 to US$25,901,700 thousand in 2025. However, adjusted total assets, after removing goodwill and intangibles, exhibit a smaller rate of increase, moving from US$13,532,100 thousand in 2021 to US$17,865,100 thousand in 2025. The difference between reported and adjusted total assets widens over the period, indicating a growing proportion of assets represented by goodwill and intangibles prior to the adjustment.

Shareholders’ Equity

Reported shareholders’ equity shows a steady increase from US$2,437,200 thousand in 2021 to US$4,598,300 thousand in 2025. In contrast, adjusted shareholders’ equity is consistently negative throughout the period, ranging from -US$4,697,400 thousand in 2021 to -US$3,438,300 thousand in 2025. The negative adjusted equity suggests that the value of goodwill and intangible assets removed exceeds the reported shareholders’ equity. The magnitude of the negative adjusted equity decreases over time, implying a lessening impact from the removal of these assets on the equity position.

The substantial divergence between reported and adjusted figures highlights the significant role of goodwill and intangible assets in the company’s reported financial position. The adjustments result in a considerably lower asset base and a negative equity position when these items are excluded. The trend of decreasing negative adjusted shareholders’ equity suggests a potential stabilization or improvement in the underlying financial health when considering the impact of goodwill and intangible asset removal.

Asset Adjustment Impact

The difference between reported and adjusted total assets increased from approximately US$7,134,600 thousand in 2021 to US$8,036,600 thousand in 2025. This indicates that the amount of goodwill and intangible assets being removed from the reported figures is growing, or at least not decreasing at the same rate as overall asset growth.

Equity Adjustment Impact

The difference between reported and adjusted shareholders’ equity is substantial and consistently negative. The reduction in this negative difference from approximately US$7,134,600 thousand in 2021 to US$5,936,600 thousand in 2025 suggests that the impact of removing goodwill and intangibles on equity is lessening over time, though equity remains negative under the adjusted figures.

The financial metrics demonstrate a notable impact from adjusting for goodwill. Reported asset turnover remains relatively stable between 0.91 and 1.00 over the five-year period, while the adjusted asset turnover exhibits a consistent increase from 1.47 in 2021 to 1.50 in 2023, followed by a decline to 1.32 in 2025. This suggests that the presence of goodwill significantly depresses the reported efficiency of asset utilization. Similarly, reported Return on Assets (ROA) fluctuates between 8.94% and 11.35%, whereas the adjusted ROA shows a more pronounced upward trend, rising from 13.78% to 16.70% before decreasing to 14.38%. This indicates that profitability relative to assets is considerably higher when goodwill is excluded from the asset base.

Total Asset Turnover

Reported total asset turnover shows minimal variation, remaining near 1.0. However, the adjusted ratio consistently exceeds the reported figure by a substantial margin, indicating a more efficient use of assets when goodwill is removed from the calculation. A slight downward trend is observed in the adjusted ratio from 2023 to 2025.

Financial Leverage

Reported financial leverage demonstrates a clear downward trend, decreasing from 8.48 in 2021 to 5.63 in 2025. Adjusted financial leverage values are not available for comparison.

Return on Equity (ROE)

Reported ROE experiences a decline from 76.50% in 2021 to 55.86% in 2025. Adjusted ROE values are not available for comparison.

Return on Assets (ROA)

Reported ROA shows an initial increase to 11.35% in 2024 before decreasing to 9.92% in 2025. The adjusted ROA consistently surpasses the reported ROA, with a peak of 16.70% in 2024, and also exhibits a declining trend from 2024 to 2025, though remaining above the reported ROA.

The consistent difference between reported and adjusted ratios highlights the significant influence of goodwill on these key performance indicators. The trends suggest that while underlying operational efficiency and profitability may be improving when measured excluding goodwill, the reported financial performance is dampened by its inclusion. The absence of adjusted financial leverage and ROE values limits a complete comparative analysis.

The period under review demonstrates consistent growth in reported total assets, while adjusted total assets also exhibit an increasing trend, though at a varying rate. Analysis of asset turnover ratios reveals distinct patterns when comparing reported and adjusted figures.

Reported Total Asset Turnover

Reported total asset turnover remained relatively stable between 2021 and 2023, fluctuating around 0.97 to 1.00. A slight decrease to 0.98 was observed in 2024, followed by a more noticeable decline to 0.91 in 2025. This suggests a decreasing efficiency in generating sales relative to reported total assets in the latter years of the period.

Adjusted Total Asset Turnover

Adjusted total asset turnover consistently exceeded reported turnover throughout the period. It showed a steady increase from 1.47 in 2021 to 1.50 in 2023, indicating improving efficiency in sales generation relative to adjusted total assets. A decrease to 1.44 was noted in 2024, and a further decline to 1.32 occurred in 2025. While still higher than the reported turnover, the downward trend warrants attention.

The difference between reported and adjusted total asset turnover highlights the impact of goodwill and intangible assets on the overall efficiency metrics. The adjusted figures, which exclude these items, consistently present a more favorable picture of asset utilization. The concurrent declines in both reported and adjusted turnover in 2024 and 2025 suggest a potential broader trend affecting sales generation efficiency, despite the continued exclusion of goodwill and intangibles in the adjusted calculation.

Asset Growth

Reported total assets increased from US$20,666,700 thousand in 2021 to US$25,901,700 thousand in 2025, representing a cumulative growth of approximately 25.3%. Adjusted total assets grew from US$13,532,100 thousand to US$17,865,100 thousand over the same period, a growth of roughly 32.0%. The higher growth rate of adjusted assets suggests an increasing proportion of assets are being accounted for by items other than goodwill and intangibles.

The observed trends indicate a potential need for further investigation into the factors driving the declining asset turnover ratios, particularly in the later years of the period. Understanding the reasons behind the increasing difference between reported and adjusted asset bases could also provide valuable insights into the company’s investment and accounting practices.

The period between 2021 and 2025 demonstrates notable shifts in reported and adjusted asset and equity figures, consequently impacting financial leverage. Reported total assets increased consistently over the five-year period, from US$20,666,700 thousand in 2021 to US$25,901,700 thousand in 2025. Reported shareholders’ equity also exhibited growth, rising from US$2,437,200 thousand to US$4,598,300 thousand during the same timeframe. This growth in equity contributed to a decreasing trend in reported financial leverage, moving from 8.48 in 2021 to 5.63 in 2025.

Adjusted Total Assets

Adjusted total assets also increased over the period, though at a slower rate than reported total assets. The figure rose from US$13,532,100 thousand in 2021 to US$17,865,100 thousand in 2025. This suggests a reduction in the value attributed to goodwill and intangible assets when making the adjustment.

Adjusted Shareholders’ Equity

A significant and consistent negative value is observed for adjusted shareholders’ equity throughout the period, ranging from -US$4,697,400 thousand in 2021 to -US$3,438,300 thousand in 2025. While the negative value becomes less pronounced over time, it remains substantial. This indicates that the adjustments made to shareholders’ equity significantly reduce its reported value, likely due to the treatment of goodwill and intangible assets.

Adjusted Financial Leverage

Values for adjusted financial leverage are not provided. However, given the trends in adjusted total assets and adjusted shareholders’ equity, it is expected that adjusted financial leverage would be substantially higher than reported financial leverage. The consistent negative adjusted shareholders’ equity would likely result in a very high, and potentially unstable, adjusted financial leverage ratio. The absence of these calculated values limits a complete comparative analysis.

The divergence between reported and adjusted figures highlights the impact of goodwill and intangible assets on the company’s financial position. The decreasing reported financial leverage suggests improved solvency based on reported figures, but the substantial negative adjusted shareholders’ equity raises concerns about the underlying financial health when considering these adjustments. Further investigation into the nature and valuation of these adjustments is warranted.

Shareholders’ equity, as reported, demonstrates a consistent upward trend over the five-year period. Conversely, adjusted shareholders’ equity presents negative values that exhibit a decreasing negative balance, indicating a reduction in the adjustment amount over time. Reported return on equity (ROE) fluctuates, beginning at 76.50% in 2021, decreasing to 65.12% in 2022, remaining relatively stable through 2024 at 66.19%, and then declining to 55.86% in 2025. Adjusted ROE values are not available for calculation.

Reported Shareholders’ Equity

Reported shareholders’ equity increased from US$2,437,200 thousand in 2021 to US$4,598,300 thousand in 2025. This represents a cumulative increase of approximately 88.38% over the period. The rate of increase appears to be slowing, with smaller year-over-year gains observed in 2024 and 2025 compared to earlier years.

Adjusted Shareholders’ Equity

Adjusted shareholders’ equity consistently registers as a negative value throughout the observed period. Starting at negative US$4,697,400 thousand in 2021, it progressively moves towards zero, reaching negative US$3,438,300 thousand in 2025. This suggests a diminishing need for the adjustments made to arrive at the adjusted equity figure, potentially indicating a change in the underlying accounting treatment or valuation of certain assets or liabilities.

Reported ROE

Reported ROE experienced a decline from 76.50% in 2021 to 65.12% in 2022, followed by relative stability between 64.29% and 66.19% from 2022 to 2024. A further decrease is observed in 2025, with ROE falling to 55.86%. This final decline suggests a potential weakening in profitability relative to shareholders’ equity.

Adjusted ROE

Values for adjusted ROE are absent. Without these values, a comparative analysis between reported and adjusted profitability cannot be performed. The absence of this metric limits the ability to assess the impact of the adjustments made to shareholders’ equity on overall profitability.

The divergence between reported and adjusted shareholders’ equity warrants further investigation to understand the nature and magnitude of the adjustments being made. The decreasing negative balance in adjusted shareholders’ equity is a notable trend, but its implications are unclear without additional context. The decline in reported ROE in the final year of the period, coupled with the lack of adjusted ROE figures, highlights a potential area of concern requiring further scrutiny.

The period under review demonstrates consistent growth in reported total assets, increasing from US$20,666,700 thousand in 2021 to US$25,901,700 thousand in 2025. Adjusted total assets also exhibit an upward trend, albeit from a lower base, rising from US$13,532,100 thousand to US$17,865,100 thousand over the same timeframe. A significant divergence exists between reported and adjusted asset values, suggesting the presence of substantial goodwill and intangible assets impacting the reported figures.

Reported Return on Assets (ROA)

Reported ROA fluctuates over the five-year period. It begins at 9.02% in 2021, dips slightly to 8.94% in 2022, then increases substantially to 10.41% in 2023 and peaks at 11.35% in 2024. A slight decline is observed in 2025, with ROA falling to 9.92%. This suggests profitability relative to total reported assets is variable.

Adjusted Return on Assets (ROA)

Adjusted ROA consistently exceeds reported ROA across all years. It starts at 13.78% in 2021 and increases to 16.70% in 2024, representing the highest value in the observed period. A decrease is noted in 2025, with adjusted ROA settling at 14.38%. The consistently higher adjusted ROA indicates that profitability is considerably stronger when goodwill and intangible assets are excluded from the asset base.

The widening gap between reported and adjusted ROA from 2021 to 2024, followed by a narrowing in 2025, warrants further investigation. The substantial difference highlights the impact of non-operating assets on the overall reported profitability. The increase in both reported and adjusted ROA between 2022 and 2024 suggests improved operational efficiency or increased profitability. The slight decline in both metrics in 2025 could indicate emerging challenges or a normalization of performance after a period of strong growth.

Trend Analysis

A clear upward trend is evident in both reported and adjusted total assets. Adjusted ROA demonstrates a stronger and more consistent upward trajectory than reported ROA, suggesting that underlying business performance is robust when excluding the influence of goodwill and intangible assets. The fluctuations in reported ROA, coupled with its lower values compared to adjusted ROA, emphasize the sensitivity of reported profitability to the valuation of these assets.