Sherwin-Williams Co. (NYSE:SHW)

The analyzed financial ratios reveal several noteworthy trends over the presented quarterly periods. Return on Assets (ROA) demonstrates a generally stable yet moderately fluctuating pattern with values ranging from a low of approximately 7.96% to a peak near 11.35%. There is an observable decline in early 2022 followed by a recovery phase, peaking toward the end of 2024 before a slight decrease seen in 2025.

Financial Leverage shows a more pronounced variability, initially rising substantially from below 7 to a near peak exceeding 9.9 in mid-2022. After this peak, a consistent downward trend emerges, declining to a baseline near 5.7 to 6 by late 2024 and stabilizing around that mark into 2025. This suggests a reduction in reliance on debt financing over the latter periods analyzed.

Return on Equity (ROE) exhibits significant variability and a general downward trend over the timeline. The metric starts exceptionally high around 68.81%, climbing to a peak above 81% during early 2022. Subsequently, ROE declines steadily with intermittent minor upticks, reaching a trough near 57.8% in 2025. This pattern reflects a diminishing equity return efficiency which may correlate with the reduction in financial leverage and changes in asset utilization.

Return on Assets (ROA)

Remains relatively stable with mild fluctuations, showing signs of recovery and growth through late 2024 before a recent moderate decline.

Financial Leverage

Increases significantly until mid-2022, followed by a clear downward trend indicating decreased use of debt and improved capital structure management.

Return on Equity (ROE)

Peaks strongly in early 2022 and then exhibits a general declining trend toward 2025, suggesting reduced profitability on shareholders' equity despite fluctuations in leverage and asset returns.

Net Profit Margin

The net profit margin exhibited a generally declining trend from early 2021 through mid-2022, decreasing from 11.23% to a low point of 8.45%. Following this period, the margin recovered and demonstrated a steady upward trend, reaching approximately 11.63% by late 2024. In the final observed quarters into 2025, the margin stabilized slightly above 11%, indicating restored profitability after the initial decline.

Asset Turnover

Asset turnover showed modest fluctuations, initially improving from 0.92 in early 2021 to peak around 1.00 in late 2023. After this peak, a gradual decline ensued, falling to 0.89 by late 2025. Despite the decrease toward the end of the period, asset turnover ratios mostly remained close to or just below 1.0, implying relatively consistent efficiency in using assets to generate sales with some deceleration in asset utilization efficiency in recent quarters.

Financial Leverage

Financial leverage increased significantly in the first half of the period, rising from 6.64 to a peak near 9.91 in mid-2022, suggesting an increased use of debt or other liabilities relative to equity. Subsequently, leverage steadily declined, reaching levels around 5.76 to 5.92 by 2025. This reduction points to a gradual de-risking or deleveraging strategy affecting the company’s capital structure through the latter quarters.

Return on Equity (ROE)

ROE followed a pattern consistent with the changes in profit margin and leverage. It initially trended upward, peaking above 81% in early 2022, driven likely by the high leverage and reasonable profitability. However, ROE then steadily declined throughout 2022 into the latter years, falling to levels near 58% by late 2025. This decrease reflects the combined effect of reduced financial leverage and lower profit margins, despite relatively stable asset turnover levels.

Overall Observations

The interrelation among the ratios indicates that the company’s return on equity was substantially influenced by its financial leverage and net profit margin changes. The initial phase of increased leverage amplified ROE despite declining profit margins, while subsequent deleveraging contributed to ROE reduction even as margins recovered. Asset turnover remained relatively stable, suggesting operational efficiency was not the primary driver of fluctuating profitability. The trends suggest strategic shifts in capital structure and cost management, with improving profitability efficiency in recent periods accompanied by more conservative leverage usage.

Tax Burden

The tax burden ratio demonstrated relative stability with slight fluctuations over the analyzed periods. Starting at 0.80 in early 2021, it gradually declined to approximately 0.76-0.78 in the most recent quarters, indicating a marginally lower proportion of earnings retained after tax over time.

Interest Burden

The interest burden ratio remained consistently close to 0.87-0.89 throughout the timeframe. This consistency suggests a stable interest expense burden relative to earnings before interest and taxes, without notable variation.

EBIT Margin

The EBIT margin showed a noticeable decline from around 15.76% in early 2021 to a trough near 11.89% in mid-2022. Subsequently, there was a recovery trend with margins rising back above 16% by late 2024 before a slight reduction in 2025. This pattern indicates a period of margin compression likely followed by efficiency improvements or pricing adjustments.

Asset Turnover

Asset turnover ratios exhibited moderate fluctuation, ranging mostly between 0.89 and 1.00. The turnover increased towards 1.00 around late 2023, reflecting improved utilization of assets to generate sales. However, a decline to approximately 0.89 by late 2025 suggests a reduction in asset efficiency in the latter stages of the period analyzed.

Financial Leverage

Financial leverage increased notably from 6.64 in early 2021 to a peak above 9.9 in mid-2022, implying increased reliance on debt financing. Subsequent quarters show a steady deleveraging trend, with leverage ratios dropping toward 5.7-6.7 in recent periods, reflecting a more conservative capital structure or stronger equity base.

Return on Equity (ROE)

ROE exhibited significant volatility, initially climbing from 68.81% in early 2021 to a peak exceeding 81% in early 2022, likely aided by high leverage and margin effects. Post-2022, ROE declined steadily to a range near 58% in late 2025. This decline correlates with the reduction in financial leverage and the earlier margin compression, indicating moderating profitability and efficiency on shareholder equity.

Net Profit Margin

The net profit margin shows a declining trend from the first quarter of 2021 through mid-2022, falling from 11.23% to 8.45%. From that point, there is a gradual recovery and steady increase, peaking at 11.63% in the fourth quarter of 2024. After this peak, it slightly decreases but remains stable around 11% through the third quarter of 2025. Overall, the margin exhibits a U-shaped pattern with a notable dip followed by a rebound and sustained improvement over time.

Asset Turnover

The asset turnover ratio remains relatively stable through the periods observed. Initially, it moves slightly upward from 0.92 to nearly 1.00 between early 2021 and late 2023, indicating somewhat enhanced efficiency in using assets to generate sales. However, beginning in 2024, there is a gradual decline back to 0.89 by the third quarter of 2025. This suggests a reduction in asset utilization efficiency in the more recent periods.

Return on Assets (ROA)

The ROA follows a pattern similar to the net profit margin. It decreases from 10.37% at the beginning of 2021 to a low of 7.96% in the middle of 2022. Thereafter, it steadily improves, reaching a high of 11.35% in late 2024. Subsequent values indicate a slight decline but maintain a level above 9.8%. This trajectory indicates an initial contraction in the company’s ability to generate profit from its assets followed by a significant recovery and subsequent stabilization.

Summary

The analysis of the three key financial ratios reveals a period of decreasing profitability and efficiency from early 2021 through mid-2022, followed by a consistent recovery phase extending through 2024. Net profit margin and ROA exhibit closely aligned trends, reflecting coordinated improvements in profitability on both net income and asset returns bases. Asset turnover shows less pronounced variation but suggests declining operational efficiency in recent quarters. The overall trend points to a recovery and strengthening profit performance with a cautious note on asset utilization efficiency in the latest periods.

The analysis of the quarterly financial data reveals several notable trends in the company's performance over the observed periods.

Tax Burden

The tax burden ratio remained relatively stable, fluctuating between 0.76 and 0.83. It showed a slight decline from around 0.83 in early 2021 to approximately 0.77 by the end of 2023, with minor variations thereafter, suggesting a modest improvement in the company’s effective tax rate over time.

Interest Burden

This ratio exhibited some stability, maintaining levels close to 0.87 to 0.89 throughout the full timeframe. There is a tendency towards a marginal increase in later periods, indicating steady control over interest expenses relative to earnings before interest and taxes.

EBIT Margin

The EBIT margin demonstrated an initial decline from about 15.76% in the first quarter of 2021 down to a low near 11.89% by mid-2022. Subsequently, a recovery trend was observed, with the margin rising to values around 16.85% by late 2024, indicating improved operational efficiency and profitability in the latter periods.

Asset Turnover

The asset turnover ratio showed moderate fluctuations, starting just below 1.0 and peaking at 1.0 around late 2023, followed by a gradual decline toward 0.89 by the end of the dataset. This pattern suggests variations in how effectively the company utilized its assets to generate sales, with recent periods reflecting slightly diminished asset use efficiency.

Return on Assets (ROA)

ROA mirrored some of the fluctuations seen in EBIT margin and asset turnover. It decreased from above 10% in early 2021 to around 7.96% by mid-2022, then improved steadily to peak near 11.35% in late 2024 before a moderate decline toward 9.81% at the end of the period. This trend highlights the company’s variable ability to generate net income from its assets, with notable recovery after mid-2022.

Overall, the company's financial performance initially faced pressures resulting in declines in profitability and asset efficiency metrics in 2021 and the first half of 2022. These indicators improved substantially during 2023 and 2024, demonstrating enhanced operational effectiveness and a better return on asset utilization. The slight deterioration toward the most recent quarters indicates a potential need for ongoing focus on managing asset utilization and profitability metrics to sustain gains achieved.

Tax Burden

The tax burden ratio demonstrates a relatively stable trend over the periods analyzed, fluctuating narrowly around 0.77 to 0.83. Initially, it is observed near 0.8, with a slight increase up to 0.83 during 2021-early 2022, followed by a subtle gradual decline and stabilization at approximately 0.77 to 0.78 through to 2025. This consistency suggests stable effective tax rates after minor fluctuations.

Interest Burden

The interest burden ratio remains largely steady, maintaining values close to 0.87 to 0.89 throughout the timeline. A minor decrease occurred in the early periods, notably from 0.89 to around 0.86, but the ratio mostly stabilizes near 0.88 to 0.89 thereafter. This indicates a consistent impact of interest expenses relative to operating income across the quarters.

EBIT Margin

The EBIT margin exhibits a clear initial downward trend from 15.76% at the start of 2021 to a low of approximately 11.89% in mid-2022, reflecting decreasing operating profitability during this interval. Subsequently, there is a noticeable recovery and improvement, with the margin rising steadily to peak around 16.85% in late 2024, before settling near 16.1% towards early 2025. This pattern reflects a significant rebound in operating efficiency and earnings power per revenue after mid-2022.

Net Profit Margin

The net profit margin parallels the EBIT margin trend, starting at 11.23% and declining to a low of 8.45% by mid-2022, indicating pressure on overall profitability. Following this period, the margin improves steadily to reach approximately 11.63% in late 2024, maintaining around 11% subsequently. This recovery suggests effective management of costs, taxes, and interest, enhancing the bottom-line profitability after mid-2022.

Overall Insights

Overall, the data reveals that both operating and net profitability weakened through late 2021 and early 2022 but showed a robust recovery from mid-2022 onward. The steady interest and tax burden ratios suggest that changes in profitability were primarily driven by operational performance rather than financing or tax structure alterations. Consistent interest burden ratios imply stable interest expenses relative to EBIT, while the slight decline and stabilization in tax burden ratify stable effective tax rates. The positive trend in EBIT and net profit margins in the latter periods reflects enhanced operational efficiency and improved cost controls contributing to stronger net earnings.