Sherwin-Williams Co. (NYSE:SHW)

An analysis of the quarterly financial data reveals distinct trends in return on assets (ROA), financial leverage, and return on equity (ROE) over the reported periods.

Return on Assets (ROA)

The ROA data begins from the first quarter of 2021 and demonstrates a generally positive trajectory with some fluctuations. Initially, ROA was recorded at 9.95%, increasing steadily to reach a peak of 10.67% in the third quarter of 2024. Slight declines are observable following this peak, with the figure tapering to 10.03% by the second quarter of 2025. The overall pattern suggests moderate improvement in asset profitability, reflecting effective utilization of assets to generate earnings over the period.

Financial Leverage

Financial leverage shows significant variability across the quarters. Starting at 6.25 in the first quarter of 2020, the ratio decreased initially to a low of 4.95 in the third quarter of 2020. Subsequently, the leverage intensified sharply, reaching a maximum of 9.91 in the second quarter of 2022. Following this peak, a continuous downward trend occurs, with financial leverage declining to approximately 5.76 by the second quarter of 2025. The data indicates a period of increased borrowing or use of debt financing culminating in mid-2022, followed by a reduction in leverage, possibly reflecting strategic deleveraging or improved equity financing in later periods.

Return on Equity (ROE)

The ROE figures show a strong upward trend from the first quarter of 2021 through mid-2022, climbing from 56.23% to a high of 81.71%. After reaching this peak, ROE fluctuates downward with some recovery episodes but generally shows a declining trend to 57.83% in the second quarter of 2025. This pattern suggests that while shareholder returns were very robust during the early periods, they experienced a gradual moderation in later quarters. The variations in ROE could be influenced by changes in financial leverage and asset profitability, reflecting shifts in capital structure and operating performance.

Overall, the data reveals that increasing financial leverage and rising ROE characterized the earlier periods, with a subsequent focus on reducing leverage and stabilizing returns on assets and equity in more recent quarters. These dynamics imply shifts in financial strategy and operational efficiency impacting profitability and risk profiles over time.

Net Profit Margin

The net profit margin data begins from the first quarter of 2021. Starting at 11.06%, it initially shows a slight upward trend to 11.23% in the following quarter, then experiences a decline throughout the remainder of 2021 and early 2022, reaching a low of 8.45% in the third quarter of 2022. From that point onward, the margin steadily recovers, passing through periodic increases and ultimately reaching a peak of 11.63% by the first quarter of 2025. The trend suggests initial challenges impacting profitability followed by successful margin improvements.

Asset Turnover

Asset turnover ratios commence from the first quarter of 2021 at 0.90 and progress with a generally positive trend, reaching a maximum of 1.00 in the fourth quarter of 2022. Afterward, a slight decline is observed, with the ratio dipping to 0.91 by the second quarter of 2025. The movement indicates enhanced efficiency in asset utilization through 2022, followed by modest reductions in the most recent quarters.

Financial Leverage

Financial leverage shows considerable fluctuation over the period analyzed. Early data reflect a reduction from 6.25 in the first quarter of 2020 to 4.95 by the third quarter of 2020. Subsequently, leverage increases sharply, peaking at 9.91 in the second quarter of 2022. After this peak, a pronounced and consistent decrease takes place through the remainder of 2022 and into 2023, stabilizing around the 5.7 to 6.7 range in the last quarters. The pattern reflects periods of increased debt or equity leverage followed by deleveraging efforts or balance sheet optimization.

Return on Equity (ROE)

Return on equity, reported from the first quarter of 2021, displays a rising trajectory early in the period, moving from 56.23% to a high of 81.71% in the second quarter of 2022. Subsequently, ROE declines steadily, trending downward through 2023 and into 2025, ultimately reaching 57.83% in the second quarter of 2025. This pattern indicates strong profitability driven possibly by financial leverage during the initial period, followed by moderation in returns on shareholder equity over time.

Overall Insights

The combination of increasing net profit margin and asset turnover through 2022 suggests improved operational efficiency and profitability. However, the concurrent high financial leverage during the same period points to increased risk and reliance on debt or equity financing to boost returns, as reflected in the elevated ROE. The subsequent decline in leverage and ROE, alongside a continuing recovery in profit margin and a slight decline in asset turnover, imply a strategic shift toward stabilizing the capital structure while maintaining profitability. This balance hints at a transition toward more sustainable growth and financial stability in recent quarters.

Tax Burden

The tax burden ratio demonstrates a relatively stable pattern from early 2021 through mid-2025, fluctuating narrowly between 0.76 and 0.83. From a peak around 0.83 in 2021 and 2022, there is a gradual decline to a stabilized range near 0.77 towards the latter periods, indicating a modest decrease in tax obligations relative to pre-tax income over time.

Interest Burden

The interest burden remains consistently high throughout the observed periods, maintaining levels around 0.87 to 0.89. This suggests that interest expenses have been stable as a proportion of earnings before interest and taxes, reflecting controlled financing costs without significant increase or decrease.

EBIT Margin

EBIT margin shows an initial downward trend from approximately 15.7% in the first quarters of 2020 to a low near 11.9% in late 2021. Following this, there is a recovery and upward trend peaking around 16.85% in late 2023, with a slight decrease thereafter. This pattern suggests that operational profitability initially weakened but subsequently improved, potentially due to enhanced cost management or stronger revenue growth.

Asset Turnover

Asset turnover ratios exhibit a gradual increase from 0.9 in early 2020 to a peak of around 1.0 in late 2023, before experiencing a mild decline to approximately 0.91 by mid-2025. The peak indicates a period of improved efficiency in using assets to generate revenue, though the slight downturn toward the end may signal diminishing operational efficiency or asset base expansion outpacing revenue.

Financial Leverage

Financial leverage presents a notable upward movement from approximately 5.3 in early 2020 to a peak near 9.9 in mid-2022, reflecting a significant increase in the use of debt. Subsequently, there is a pronounced decline to around 5.7 by mid-2025. This trajectory indicates an initial expansion in leverage followed by a deleveraging phase, suggesting strategic adjustments to the capital structure and risk management.

Return on Equity (ROE)

ROE trends upward from about 56% in early 2021 to a high exceeding 81% in mid-2022, evidencing strong profitability relative to shareholders' equity. After this peak, ROE declines steadily toward approximately 58% by mid-2025. The pattern suggests periods of exceptional returns driven by operational performance and leverage, followed by a normalization or reduction in returns, possibly due to lower profit margins or reduced financial leverage.

Net Profit Margin

The net profit margin is first reported in the period ending March 31, 2021, at 11.06%. It shows a general declining trend through 2021 and 2022, reaching a low of 8.45% in September 2022. From this low, the margin gradually recovers, increasing steadily throughout 2023 and into the early quarters of 2024, peaking at 11.63% in June 2025 before showing a slight decrease to 11.03% in the following quarter. Overall, the net profit margin exhibits a U-shaped pattern over the observed periods, indicating some challenges in 2022 followed by an improving profitability trend thereafter.

Asset Turnover

Asset turnover is recorded starting March 31, 2021, at 0.90 and generally trends upward through 2023, reaching its highest point at 1.00 in December 2023. Following this peak, the ratio declines gradually through 2024 and mid-2025, ending at 0.91. This suggests increasing efficiency in assets use up to late 2023, followed by a modest decrease in efficiency in subsequent periods, though the ratio remains close to 1.0, signifying relatively stable asset utilization overall.

Return on Assets (ROA)

Return on assets begins at 9.95% in March 2021 and presents fluctuations over the time span. It drops to a low of 7.96% in September 2022, mirroring the net profit margin trend, but subsequently recovers and shows a steady upward movement through 2023, reaching 10.51% by December 2023. The ROA remains relatively stable above 10% through 2024 and mid-2025, peaking at 11.35% in March 2025 before a slight decline. The ROA trend reflects the combined effects of profitability and asset efficiency, with a period of softness in 2022 followed by recovery and improved asset profitability afterward.

Tax Burden

The tax burden ratio, available from the first quarter of 2021 onward, shows a relatively stable pattern with a slight downward trend over time. Starting at approximately 0.81 in the early quarters of 2021, it gradually decreases to around 0.77 by the end of 2023 and remains in the 0.76 to 0.78 range through mid-2025. This indicates a marginally lower proportion of earnings being reduced by taxes in the later periods compared to earlier ones.

Interest Burden

The interest burden ratio remains consistently steady over the observed quarters, fluctuating mildly between 0.86 and 0.89. This stability suggests that the company maintained a consistent level of interest expenses relative to earnings before interest and taxes, without significant changes in debt servicing costs across the periods.

EBIT Margin

The EBIT margin percentage shows a general upward trend over the analyzed timeframe. Initial values around 15.5% in early 2021 dip to about 11.9% by late 2021 but then gradually increase, reaching a peak above 16.8% in late 2023 before stabilizing slightly above 16% through mid-2025. This progression reflects an improvement in operational profitability despite some volatility, indicating growing efficiency or pricing power.

Asset Turnover

Asset turnover displays moderate fluctuation with values ranging between 0.9 and 1.0 in early 2021, peaking at 1.0 in late 2023. After this peak, a slight decline occurs, with ratios moving downwards to approximately 0.91 by mid-2025. The initial increase suggests improved efficiency in utilizing assets to generate sales, while the later decline could imply a slight reduction in asset utilization efficiency in recent quarters.

Return on Assets (ROA)

ROA mirrors patterns seen in EBIT margin with some variations. Starting near 9.95% in early 2021, it dips to roughly 7.96% by late 2021, followed by a steady recovery and growth, peaking at around 11.35% in early 2025 before slightly retreating to about 10% by mid-2025. This indicates an overall improvement in the company’s ability to convert its assets into net income, although with some short-term setbacks.

Tax Burden Ratio

Starting from a value close to 0.81 in the initial available period, the tax burden ratio exhibits a gradual decline over the subsequent quarters. The ratio decreases from approximately 0.83 in early 2022 to around 0.77 by late 2023 and remains relatively stable around this level through mid-2025. This trend indicates a slight reduction in the proportion of earnings paid as taxes over time, suggesting improved tax efficiency or favorable tax conditions.

Interest Burden Ratio

The interest burden ratio remains relatively stable throughout the observed periods, fluctuating narrowly between 0.86 and 0.89. This stability implies consistent interest expenses relative to earnings before interest and taxes, with no significant changes in the company's financing costs or interest coverage observed over the timeline.

EBIT Margin

The EBIT margin shows an initial decline from approximately 15.57% in early 2020 to a low of about 11.89% by September 2022. Following this period, a noticeable recovery occurs, with margins increasing steadily to reach approximately 16.85% by the third quarter of 2024. This recovery suggests improved operating profitability, potentially due to cost improvements, pricing power, or operational efficiencies realized after the initial downturn.

Net Profit Margin

Similarly to the EBIT margin, the net profit margin decreases from around 11.06% in early 2020 to a trough near 8.45% in late 2022. Thereafter, it progressively rises, peaking at about 11.63% in mid-2024 before a slight dip to near 11.03% at the start of 2025. This pattern reflects a restoration of overall profitability after a period of contraction, consistent with improved margins observed at the EBIT level, possibly supported by tax and interest expense trends.