Financial Review: Element Solutions (NYSE:ESI) versus Sherwin-Williams (NYSE:SHW)

Sherwin-Williams (NYSE:SHW) and Element Solutions (NYSE:ESI) are both basic materials companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, dividends, risk, institutional ownership, profitability, valuation and earnings.

Profitability

This table compares Sherwin-Williams and Element Solutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sherwin-Williams	10.86%	64.55%	11.10%
Element Solutions	5.32%	14.19%	7.30%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Sherwin-Williams and Element Solutions, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sherwin-Williams	0	6	7	1	2.64
Element Solutions	0	2	6	3	3.09

Sherwin-Williams currently has a consensus price target of $365.67, indicating a potential upside of 20.28%. Element Solutions has a consensus price target of $39.57, indicating a potential downside of 1.76%. Given Sherwin-Williams’ higher possible upside, research analysts clearly believe Sherwin-Williams is more favorable than Element Solutions.

Valuation and Earnings

This table compares Sherwin-Williams and Element Solutions”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sherwin-Williams	$23.94 billion	3.13	$2.57 billion	$10.42	29.18
Element Solutions	$2.80 billion	3.51	$190.80 million	$0.62	64.97

Sherwin-Williams has higher revenue and earnings than Element Solutions. Sherwin-Williams is trading at a lower price-to-earnings ratio than Element Solutions, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

77.7% of Sherwin-Williams shares are owned by institutional investors. Comparatively, 92.3% of Element Solutions shares are owned by institutional investors. 0.2% of Sherwin-Williams shares are owned by company insiders. Comparatively, 6.2% of Element Solutions shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Volatility and Risk

Sherwin-Williams has a beta of 1.12, meaning that its share price is 12% more volatile than the S&P 500. Comparatively, Element Solutions has a beta of 1.25, meaning that its share price is 25% more volatile than the S&P 500.

Dividends

Sherwin-Williams pays an annual dividend of $3.20 per share and has a dividend yield of 1.1%. Element Solutions pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. Sherwin-Williams pays out 30.7% of its earnings in the form of a dividend. Element Solutions pays out 51.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Sherwin-Williams has increased its dividend for 48 consecutive years. Sherwin-Williams is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Sherwin-Williams beats Element Solutions on 11 of the 18 factors compared between the two stocks.

About Sherwin-Williams

The Sherwin-Williams Company engages in the development, manufacture, distribution, and sale of paints, coating, and related products to professional, industrial, commercial, and retail customers. It operates through three segments: Paint Stores Group, Consumer Brands Group, and Performance Coatings Group. The Paint Stores Group segment offers architectural paints and coatings, and protective and marine products, as well as OEM product finishes and related products for architectural and industrial paint contractors, and do-it-yourself homeowners. The Consumer Brands Group segment supplies a portfolio of branded and private-label architectural paints, stains, varnishes, industrial products, wood finishes products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks, and adhesives to retailers, including home centers and hardware stores, and dedicated dealers and distributors. The Performance Coatings Group segment develops and sells industrial coatings for wood finishing and general industrial applications, automotive refinish products, protective and marine coatings, coil coatings, packaging coatings, and performance-based resins and colorants. It serves retailers, dealers, jobbers, licensees, and other third-party distributors through its branches and direct sales staff, as well as through outside sales representatives. The company has operations primarily in the North and South America, the Caribbean, Europe, Asia, and Australia. The Sherwin-Williams Company was founded in 1866 and is headquartered in Cleveland, Ohio.

About Element Solutions

Element Solutions Inc operates as a specialty chemicals company in the United States, China, and internationally. The company operates in two segments, Electronics, and Industrial & Specialty. The Electronics segment researches, formulates, and sells specialty chemicals and materials for various types of electronics hardware products. This segment also supplies surface mount technologies, fluxes, thermal management material, coatings, and other attachment materials; chemical formulations to the electronics industry; and advanced copper interconnects, die attachment, sintered silver material, adhesives, wafer bump processes, and photomask technologies for semiconductor industry. It primarily serves mobile communications, computers, automobiles, and aerospace equipment industries. The Industrial & Specialty segment provides industrial solutions, which include chemical systems that protect and decorate metal and plastic surfaces; consumable chemicals that enable printing image transfer on flexible packaging materials; and chemistries used in water-based hydraulic control fluids for offshore energy production applications. It serves aerospace, automotive, construction, consumer electronics, consumer packaged goods, and oil and gas production end markets. The company was formerly known as Platform Specialty Products Corporation and changed its name to Element Solutions Inc in January 2019. Element Solutions Inc was founded in 1785 and is headquartered in Fort Lauderdale, Florida.