Sherwin-Williams Co. (NYSE:SHW)

The financial ratios presented demonstrate several notable trends over the five-year period. Generally, adjusted ratios present a more conservative financial picture than reported ratios, as would be expected. A consistent pattern emerges where adjustments tend to lower measures of profitability and leverage, while sometimes increasing liquidity ratios.

Asset Turnover

Both reported and adjusted total asset turnover initially increased between 2021 and 2023, suggesting improved efficiency in utilizing assets to generate sales. However, a slight decline is observed in both metrics from 2023 to 2025, with the adjusted ratio experiencing a more pronounced decrease. This indicates a potential weakening in asset utilization efficiency towards the end of the period.

Liquidity

The reported current ratio exhibits volatility, decreasing from 0.99 in 2022 to 0.79 in 2024 before recovering slightly to 0.87 in 2025. Conversely, the adjusted current ratio demonstrates a more stable trend, remaining above 0.89 throughout the period. The adjustments consistently improve the current ratio, suggesting that reported current assets may include items less readily convertible to cash.

Leverage

Reported debt to equity, debt to capital, and financial leverage all show a consistent downward trend, indicating a decreasing reliance on debt financing. The adjusted ratios mirror this trend, though at lower levels, confirming a more conservative capital structure when adjustments are considered. The adjustments consistently reduce these leverage ratios, implying that certain reported liabilities may be less representative of true financial obligations.

Profitability

Reported net profit margin increased from 9.35% in 2021 to 11.61% in 2024, before decreasing to 10.90% in 2025. The adjusted net profit margin, while lower overall, shows a more substantial increase in 2025, reaching 12.73%. This suggests that certain reported revenues or gains may be non-recurring or subject to greater scrutiny under adjusted accounting. Both reported and adjusted return on assets show an initial increase, followed by a decline in the final year.

Return on Investment

Reported return on equity (ROE) experienced a significant decrease from 76.50% in 2021 to 55.86% in 2025, while adjusted ROE also declined, but to a lesser extent. Similarly, reported return on assets (ROA) decreased from 9.02% to 9.92% over the same period. The adjustments consistently lower both ROE and ROA, indicating that reported equity and asset values may be overstated relative to underlying profitability. Adjusted ROA shows a more consistent trend than the reported ROA.

In summary, the adjustments applied to these financial ratios generally result in a more conservative financial profile. While the reported ratios indicate improving profitability and decreasing leverage through 2024, the adjusted ratios suggest a more moderate and stable performance. The increasing divergence between reported and adjusted figures in the later years warrants further investigation into the nature of the adjustments being made.

The reported total asset turnover remained relatively stable between 0.97 and 1.00 from 2021 to 2023, before decreasing to 0.91 in 2025. A similar pattern is observed in the adjusted total asset turnover, which exhibited a slight decline over the five-year period, moving from 0.94 in 2021 to 0.89 in 2025. Net sales demonstrated consistent growth throughout the period, while total assets and adjusted total assets also generally increased, though at varying rates.

Net Sales Trend

Net sales increased steadily from US$19,944.6 million in 2021 to US$23,574.3 million in 2025, indicating consistent revenue growth over the analyzed timeframe. The rate of growth appears to be moderating in the later years.

Total Asset Trend

Total assets increased from US$20,666.7 million in 2021 to US$25,901.7 million in 2025. The largest increase occurred between 2024 and 2025. This growth in assets did not translate into a proportional increase in sales, as evidenced by the declining asset turnover ratios.

Adjusted Total Asset Turnover

The adjusted total asset turnover ratio experienced a gradual decrease from 0.94 in 2021 to 0.89 in 2025. This suggests that the company is becoming less efficient in generating sales from its adjusted asset base. The difference between the reported and adjusted ratios is relatively small, indicating that the adjustments to total assets are not substantially altering the overall efficiency picture.

Relationship Between Sales and Assets

While net sales consistently increased, the growth in both total assets and adjusted total assets outpaced the sales growth in the later years of the period. This divergence contributed to the observed decline in both the reported and adjusted total asset turnover ratios. The company appears to be investing in assets at a rate that is not currently yielding proportional increases in sales.

The consistent growth in net sales is a positive indicator, but the declining asset turnover ratios warrant further investigation. Understanding the nature of the asset increases and their impact on operational efficiency is crucial for assessing the company’s long-term performance.

The reported current ratio exhibited fluctuations over the five-year period, while the adjusted current ratio demonstrated a generally more stable profile. A review of the trends reveals insights into the company’s short-term liquidity position when considering adjustments to current assets.

Reported Current Ratio Trend

The reported current ratio began at 0.88 in 2021, increased to 0.99 in 2022, then decreased to 0.83 in 2023 and further to 0.79 in 2024. A slight recovery to 0.87 was observed in 2025. This indicates a volatile short-term liquidity position based on reported figures.

Adjusted Current Ratio Trend

The adjusted current ratio started at 1.00 in 2021, rose to a peak of 1.13 in 2022, and subsequently decreased to 0.94 in 2023 and 0.89 in 2024. The ratio then increased to 0.97 in 2025. The adjusted ratio consistently remained above 0.89, suggesting a more secure short-term liquidity position than indicated by the reported ratio alone.

Comparison of Reported and Adjusted Ratios

The adjusted current ratio consistently exceeded the reported current ratio throughout the period. This difference suggests that the adjustments made to current assets positively impact the assessment of short-term liquidity. The magnitude of the difference varied, but the adjusted ratio consistently presented a more favorable liquidity picture.

Current Assets and Liabilities

Current assets increased from US$5,053,700 thousand in 2021 to US$6,007,400 thousand in 2025, with intermediate fluctuations. Current liabilities exhibited a consistent upward trend, increasing from US$5,719,500 thousand in 2021 to US$6,920,300 thousand in 2025. The increase in liabilities outpaced the increase in assets, contributing to the initial decline in the reported current ratio.

Adjusted Current Assets

Adjusted current assets followed a similar pattern to reported current assets, increasing overall from US$5,695,600 thousand in 2021 to US$6,686,700 thousand in 2025. The adjustments made to arrive at this figure appear to have a stabilizing effect on the calculated current ratio, mitigating some of the volatility observed in the reported ratio.

In summary, while both the reported and adjusted current ratios experienced fluctuations, the adjusted ratio consistently indicated a stronger short-term liquidity position. The increasing trend in current liabilities warrants continued monitoring, even with the positive impact of the adjustments to current assets.

The adjusted debt to equity ratio demonstrates a consistent downward trend over the five-year period from 2021 to 2025. While total debt and shareholders’ equity both increased in absolute terms, the adjustments made to these figures resulted in a decreasing ratio, indicating a strengthening equity position relative to debt. This suggests a reduced reliance on debt financing over time.

Adjusted Debt to Equity Ratio - Overall Trend

The adjusted debt to equity ratio decreased from 3.01 in 2021 to 2.17 in 2025. The rate of decline slowed over the period; the largest decrease occurred between 2021 and 2022 (0.31), while the smallest decrease was between 2024 and 2025 (0.04). This suggests that the initial improvements in the ratio were more substantial, with subsequent years showing diminishing returns in terms of relative debt reduction.

Adjusted Total Debt

Adjusted total debt increased from US$11,495,400 thousand in 2021 to US$13,138,000 thousand in 2025. The increase was not linear, with a slight decrease observed between 2022 and 2023. This suggests potential debt repayment or restructuring activities during that period, offset by subsequent borrowing.

Adjusted Shareholders’ Equity

Adjusted shareholders’ equity exhibited consistent growth, rising from US$3,819,700 thousand in 2021 to US$6,045,400 thousand in 2025. This steady increase in equity contributed significantly to the declining adjusted debt to equity ratio. The largest annual increase occurred between 2021 and 2022 (US$1,814,200 thousand), indicating a period of substantial equity accumulation.

The consistent decline in the adjusted debt to equity ratio, coupled with the growth in adjusted shareholders’ equity, indicates an improving financial leverage profile. While adjusted total debt increased overall, the rate of equity growth outpaced that of debt, leading to a more favorable capital structure.

The reported debt to capital ratio demonstrates a consistent, albeit moderate, decline over the five-year period, moving from 0.80 in 2021 to 0.71 in both 2024 and 2025. Total debt fluctuated, increasing from 2021 to 2022, decreasing in 2023, increasing slightly in 2024, and then increasing more substantially in 2025. Total capital generally increased throughout the period, with a slight decrease observed between 2022 and 2023.

Adjusted Debt to Capital Ratio

The adjusted debt to capital ratio exhibits a similar downward trend to the reported ratio, decreasing from 0.75 in 2021 to 0.68 in 2025. This indicates that, even after adjustments are made to the components of debt and capital, the company’s leverage is decreasing over time. The rate of decline appears to be slowing, with the difference between 2023 and 2024 being smaller than the difference between 2021 and 2022.

Adjusted total debt generally follows the trend of reported total debt, increasing from 2021 to 2022, decreasing in 2023, increasing in 2024, and increasing again in 2025. However, the magnitude of the adjustments appears to be relatively consistent across the years. Adjusted total capital also mirrors the trend of reported total capital, showing a general increase with a slight dip between 2022 and 2023. The adjustments to capital appear to be more substantial than those to debt, as evidenced by the larger difference between reported and adjusted total capital figures.

Trend Analysis

A consistent downward trend is observed in both the reported and adjusted debt to capital ratios. This suggests a strengthening financial position, potentially due to increased equity financing, debt reduction, or a combination of both. The stabilization of the adjusted debt to capital ratio at 0.68 and 0.69 in the final two years suggests a possible plateauing of deleveraging efforts.

Debt and Capital Components

While both total debt and total capital generally increased over the period, the growth in capital outpaced the growth in debt, contributing to the declining debt to capital ratios. The adjustments made to both debt and capital suggest a reclassification or revaluation of certain items, impacting the overall leverage calculation.

The consistent decrease in the adjusted debt to capital ratio indicates a reduced reliance on debt financing relative to the company’s capital structure. This could be viewed favorably by investors and credit rating agencies, potentially leading to lower borrowing costs and improved financial flexibility.

The financial leverage metrics demonstrate a consistent trend of decreasing risk over the five-year period. Both reported and adjusted financial leverage ratios exhibit declines, suggesting a strengthening financial position. The adjusted figures, while lower than the reported values, mirror this overall trend.

Reported Financial Leverage

Reported financial leverage decreased steadily from 8.48 in 2021 to 5.63 in 2025. The largest decrease occurred between 2021 and 2022, falling by 1.20. Subsequent annual decreases were more moderate, ranging from 0.15 to 0.23. This consistent decline indicates a reduced reliance on debt financing relative to equity.

Adjusted Financial Leverage

Adjusted financial leverage also showed a consistent downward trend, moving from 5.56 in 2021 to 4.38 in 2025. Similar to the reported leverage, the most significant reduction was observed between 2021 and 2022, with a decrease of 0.52. Annual declines from 2022 to 2025 were smaller, ranging from 0.09 to 0.10. The adjusted leverage consistently remains lower than the reported leverage throughout the period.

Asset and Equity Trends

Total assets increased over the period, from US$20,666,700 in 2021 to US$25,901,700 in 2025. However, shareholders’ equity experienced a more substantial percentage increase, rising from US$2,437,200 to US$4,598,300 over the same timeframe. The adjusted total assets and adjusted shareholders’ equity also increased, following a similar pattern to the reported figures. The greater growth in equity relative to assets contributes to the observed decline in both reported and adjusted financial leverage.

The difference between reported and adjusted figures suggests that certain asset or equity items are being reclassified or accounted for differently in the adjusted calculations. Regardless, the overall trend of decreasing leverage, as indicated by both sets of metrics, points to improved financial stability and reduced financial risk.

The reported net profit margin exhibited an overall upward trend from 2021 to 2024, followed by a slight decrease in 2025. However, the adjusted net profit margin presents a different pattern. While initially decreasing from 2021 to 2022, it remained relatively stable for the next two years before experiencing a significant increase in 2025. A detailed examination of the adjusted net profit margin reveals key insights into the company’s profitability.

Adjusted Net Profit Margin Trend

In 2021, the adjusted net profit margin stood at 10.39%. This figure decreased to 9.59% in 2022, suggesting potential increases in costs or decreased pricing power. From 2022 to 2024, the adjusted net profit margin remained relatively flat, fluctuating between 9.59% and 10.06%, indicating a period of stable, but not expanding, profitability. A substantial increase was then observed in 2025, with the adjusted net profit margin reaching 12.73%. This represents the highest value within the observed period and suggests improved operational efficiency, cost management, or revenue generation.

Comparison with Reported Net Profit Margin

The divergence between the reported and adjusted net profit margins indicates the presence of non-recurring items or accounting adjustments impacting the reported figures. The reported net profit margin increased consistently from 9.35% in 2021 to 11.61% in 2024, before decreasing slightly to 10.90% in 2025. The adjustments made to arrive at the adjusted net income appear to have a dampening effect on profitability in the earlier years (2022-2024) but significantly boosted the reported results in 2025. This suggests that the nature of these adjustments changed over time, potentially shifting from negative impacts to positive impacts on net income.

The substantial increase in the adjusted net profit margin in 2025 warrants further investigation to understand the underlying drivers. It is important to identify the specific adjustments made to net income that contributed to this improvement and assess their sustainability. The relatively stable adjusted net profit margin from 2022 to 2024, coupled with the significant jump in 2025, suggests that the company’s core profitability may be improving, but is also subject to the influence of specific, potentially non-recurring, adjustments.

The period between 2021 and 2025 demonstrates fluctuating performance when examining adjusted return on equity. While net income and shareholders’ equity generally increased over the five-year span, the adjusted ROE exhibited a more complex pattern.

Adjusted Return on Equity (ROE) - Overall Trend

Adjusted ROE began at 54.25% in 2021, then decreased through 2023, reaching a low of 43.56%. A slight increase to 43.63% was observed in 2024, followed by a more substantial rise to 49.65% in 2025. This indicates a period of declining profitability relative to equity, followed by a recovery in the final year.

Adjusted Net Income

Adjusted net income showed consistent growth from 2021 to 2024, increasing from US$2,072.2 million to US$2,324.6 million. However, a significant jump occurred in 2025, reaching US$3,001.8 million. This accelerated growth in net income likely contributed to the ROE improvement observed in that year.

Adjusted Shareholders’ Equity

Adjusted shareholders’ equity consistently increased throughout the period, rising from US$3,819.7 million in 2021 to US$6,045.4 million in 2025. This growth, while positive, may have partially offset the impact of increasing net income on ROE during the 2021-2024 timeframe, as the denominator in the ROE calculation increased at a faster rate than the numerator.

Comparison with Reported ROE

Reported ROE values were consistently higher than adjusted ROE values across all years. The reported ROE peaked at 76.50% in 2021 and declined to 55.86% in 2025, demonstrating a similar downward trend followed by a slight recovery. The difference between reported and adjusted ROE suggests that adjustments made to net income and shareholders’ equity had a substantial impact on the calculated return.

In summary, the adjusted ROE experienced a period of decline before recovering in the final year of the observed period. This fluctuation was influenced by both the growth of adjusted net income and the consistent increase in adjusted shareholders’ equity. The significant increase in adjusted net income in 2025 appears to be a key driver of the ROE improvement in that year.

The adjusted return on assets (ROA) exhibited a fluctuating pattern over the five-year period. While the reported ROA generally increased from 2021 to 2024 before declining in 2025, the adjusted ROA presents a slightly different trajectory. A detailed examination of the adjusted ROA and its components reveals key insights into the company’s performance.

Adjusted ROA Trend

The adjusted ROA began at 9.75% in 2021, decreased to 9.09% in 2022, and continued a downward trend to 9.39% in 2023. A modest increase was observed in 2024, with the adjusted ROA reaching 9.58%. A significant increase occurred in 2025, with the adjusted ROA rising to 11.33%. This final year’s value represents the highest adjusted ROA within the observed period.

Relationship to Adjusted Net Income

Adjusted net income generally increased from US$2,072.2 million in 2021 to US$3,001.8 million in 2025. The increase in adjusted ROA in 2025 aligns with the substantial growth in adjusted net income during that year. Prior to 2025, the adjusted ROA fluctuations were less pronounced, despite consistent increases in adjusted net income, suggesting that changes in adjusted total assets played a more significant role in the earlier variations.

Relationship to Adjusted Total Assets

Adjusted total assets increased steadily from US$21,245.8 million in 2021 to US$26,486.5 million in 2025. The rate of asset growth varied; the largest single-year increase occurred between 2024 and 2025. The decrease in adjusted ROA from 2021 to 2022 coincided with a larger percentage increase in adjusted total assets than the percentage increase in adjusted net income. The subsequent stabilization and eventual increase in adjusted ROA suggest a more favorable balance between asset growth and profitability in later years.

In summary, the adjusted ROA demonstrates a complex relationship between profitability and asset utilization. While asset growth was consistent throughout the period, the adjusted ROA was most significantly impacted by changes in adjusted net income, particularly the substantial increase observed in 2025. The earlier fluctuations in adjusted ROA highlight the importance of maintaining a balance between asset expansion and earnings generation.