Trade-Ideas: Sherwin-Williams (SHW) Is Today's Momo Momentum Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Sherwin-Williams ( SHW) as a momo momentum candidate. In addition to specific proprietary factors, Trade-Ideas identified Sherwin-Williams as such a stock due to the following factors:

  • SHW has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $208.1 million.
  • SHW has a PE ratio of 30.8.
  • SHW is currently in the upper 30% of its 1-year range.
  • SHW is in the upper 25% of its 20-day range.
  • SHW is in the upper 35% of its 5-day range.
  • SHW is currently trading above yesterday's high.
  • SHW has experienced a gap between today's open and yesterday's close of 1.1%.

'Momo Momentum' stocks are valuable stocks to watch for a variety of reasons including historical back testing and price action. Market technicians refer to such stocks as being in a mark-up phase before a possible distribution period and price decline. Technical analysts and traders frequently find that the factors referenced above tend to create a temporary burst of strong wind in a stock's sail. Nevertheless, all successful traders must excel at maximizing gains while keeping losses to an absolute minimum. For that reason, the holding period on momo momentum stocks must always be a primary consideration, and this part of the puzzle is ultimately at the discretion of each individual's risk tolerance and portfolio risk management skills.

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More details on SHW:

The Sherwin-Williams Company develops, manufactures, distributes, and sells paints, coatings, and related products to professional, industrial, commercial, and retail customers primarily in North and South America. The stock currently has a dividend yield of 1%. SHW has a PE ratio of 30.8. Currently there are 5 analysts that rate Sherwin-Williams a buy, 2 analysts rate it a sell, and 5 rate it a hold.

The average volume for Sherwin-Williams has been 664,000 shares per day over the past 30 days. Sherwin-Williams has a market cap of $25.9 billion and is part of the basic materials sector and chemicals industry. The stock has a beta of 0.38 and a short float of 3.3% with 3.29 days to cover. Shares are up 5.7% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Sherwin-Williams as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, impressive record of earnings per share growth, increase in net income and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 14.1%. Since the same quarter one year prior, revenues slightly increased by 3.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • SHERWIN-WILLIAMS CO has improved earnings per share by 21.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, SHERWIN-WILLIAMS CO increased its bottom line by earning $8.80 versus $7.26 in the prior year. This year, the market expects an improvement in earnings ($11.25 versus $8.80).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 13.8% when compared to the same quarter one year prior, going from $115.46 million to $131.40 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Chemicals industry and the overall market, SHERWIN-WILLIAMS CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has increased to -$55.07 million or 33.74% when compared to the same quarter last year. In addition, SHERWIN-WILLIAMS CO has also vastly surpassed the industry average cash flow growth rate of -24.91%.

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