Sherwin-Williams Co. (NYSE:SHW)

Finished Goods

The value of finished goods demonstrated an initial decline from 1,427,600 thousand US dollars in 2020 to 1,378,800 thousand in 2021. Subsequently, there was a marked increase, peaking at 1,957,700 thousand in 2022. This peak was followed by a decrease in the next two years, falling to 1,810,900 thousand in 2023 and further to 1,751,900 thousand in 2024. Overall, the finished goods inventory showed a volatile trend with a significant surge in 2022 before tapering down.

Work in Process and Raw Materials

This category exhibited a consistent upward trend from 376,500 thousand US dollars in 2020 to a high of 668,800 thousand in 2022. After reaching this peak, the value declined to 518,900 thousand in 2023 but saw a moderate rebound to 536,200 thousand in 2024. This pattern indicates variability with a peak in 2022 and some stabilization afterward.

Total Inventories

Total inventories increased steadily from 1,804,100 thousand US dollars in 2020 to 2,627,500 thousand in 2022, reflecting the accumulation of both finished goods and work in process/raw materials. However, total inventories declined in the subsequent years, reaching 2,329,800 thousand in 2023 and 2,288,100 thousand in 2024. Despite the decline after 2022, inventories remained significantly higher than the 2020 level.

Overall Analysis

The inventory data reflects a general growth trend through 2022, followed by a contraction phase in 2023 and 2024. The peak in 2022 across finished goods, work in process, raw materials, and total inventories suggests a period of heightened stock accumulation. The subsequent decline could indicate strategies aimed at inventory reduction or adjustments aligned with operational changes or demand fluctuations. The inventory levels in 2024 remain elevated compared to 2020, pointing to sustained higher base inventory levels despite the recent decreases.

The financial data indicates notable trends when comparing reported figures with inventory LIFO reserve adjusted figures over the five-year period ending December 31, 2024.

Inventories

Reported inventories exhibit a rising trend from 1,804,100 thousand USD in 2020 to a peak of 2,626,500 thousand USD in 2022, followed by a decrease in the subsequent two years, reaching 2,288,100 thousand USD in 2024. Adjusted inventories, reflecting LIFO reserve adjustments, maintain a similar pattern but at consistently higher levels, increasing from 2,116,200 thousand USD in 2020 to 3,419,200 thousand USD in 2022, then declining to 2,918,300 thousand USD by 2024. This demonstrates significant inventory valuation effects, with the adjusted inventory values remaining substantially above reported amounts throughout.

Current Assets

Reported current assets follow an upward trajectory from 4,591,400 thousand USD in 2020 to a high of 5,907,700 thousand USD in 2022, before decreasing to 5,400,800 thousand USD in 2024. Adjusted current assets also show growth over time, rising from 4,903,500 thousand USD in 2020 to 6,700,400 thousand USD in 2022, with a decline to 6,031,000 thousand USD in 2024. The adjustment widens the gap in all years, highlighting the influence of inventory valuation on current asset totals.

Total Assets

Total assets reported show a steady upward movement from 20,401,600 thousand USD in 2020 to 23,632,600 thousand USD in 2024. Adjusted total assets also increase over this period from 20,713,700 thousand USD to 24,262,800 thousand USD. The adjusted figures remain higher every year, indicating a persistent impact of inventory reserve adjustments on total asset valuation.

Shareholders’ Equity

Reported shareholders’ equity displays fluctuations, starting at 3,610,800 thousand USD in 2020, dipping significantly to 2,437,200 thousand USD in 2021, then recovering to 4,051,200 thousand USD by 2024. Adjusted shareholders’ equity follows a similar pattern but generally remains higher, beginning at 3,922,900 thousand USD in 2020, decreasing to 3,030,200 thousand USD in 2021, and reaching 4,681,400 thousand USD in 2024. The adjustment results in a consistently larger equity base, which suggests that LIFO reserve adjustments contribute positively to equity values.

Net Income

Reported net income fluctuates, decreasing from 2,030,400 thousand USD in 2020 to 1,864,400 thousand USD in 2021, then increasing to 2,681,400 thousand USD in 2024. Adjusted net income exhibits a steadier increase, rising from 2,002,700 thousand USD in 2020 to 2,643,600 thousand USD in 2024, with a minor dip in 2023. The adjustment narrows the income variability seen in reported figures and generally depicts improved profitability, particularly notable in the year 2021 where adjusted income surpasses reported income substantially.

Overall, the data reveals that inventory LIFO reserve adjustments have a material impact on the company's reported financial position and performance. Adjusted figures are higher across inventories, current assets, total assets, shareholders' equity, and net income, reflecting the conservative nature of LIFO accounting and the potential understatement of asset values and profitability in reported data. The trends also highlight relative stability and growth in adjusted net income compared to more pronounced fluctuations in reported net income. The adjustments provide a more consistent and generally enhanced view of financial strength and profitability over the five-year period.

Current Ratio Trends

The reported current ratio demonstrates a declining trend over the five-year period, decreasing from 1.00 in 2020 to 0.79 in 2024. The adjusted current ratio, which accounts for the LIFO reserve, follows a similar pattern but remains slightly higher than the reported figures in each year. It starts at 1.07 in 2020 and tapers to 0.89 in 2024. This indicates a gradual reduction in short-term liquidity, though the adjustment for inventory reserves somewhat mitigates this decline.

Net Profit Margin Analysis

The reported net profit margin dips from 11.06% in 2020 to a low of 9.12% in 2022, before improving to 11.61% in 2024. The adjusted net profit margin starts slightly below the reported at 10.91% in 2020, decreases steadily to 9.82% in 2023, and then rises to 11.44% by 2024. The adjusted margin consistently remains close to but slightly below the reported margin, suggesting some impact of inventory accounting adjustments on profitability ratios.

Total Asset Turnover

The reported total asset turnover shows a generally stable upward trend, rising from 0.90 in 2020 to a peak of 1.00 in 2023, followed by a slight decrease to 0.98 in 2024. The adjusted turnover follows a similar pattern but is consistently lower than the reported turnover, indicating that inventory adjustments reduce asset efficiency measures slightly over time.

Financial Leverage Patterns

Reported financial leverage experiences significant fluctuations, peaking sharply at 8.48 in 2021 before declining steadily to 5.83 in 2024. The adjusted leverage similarly peaks at 7.02 in 2021 but demonstrates a smoother decline to 5.18 by 2024. This suggests that the impact of the LIFO reserve adjustment moderates the reported volatility in leverage, but the overall trend points to deleveraging in recent years.

Return on Equity (ROE)

Reported ROE is notably high throughout the period, with a peak of 76.5% in 2021, followed by declines to around mid-60% levels in 2023 and 2024. The adjusted ROE, while also high, is consistently lower than the reported figures, peaking at 70.8% in 2021 and decreasing to 56.47% by 2024. The adjusted figures reflect the dampening effect of inventory-related adjustments on shareholder returns but confirm sustained strong profitability.

Return on Assets (ROA)

The reported ROA decreases initially from 9.95% in 2020 to 8.94% in 2022, then rises steadily to 11.35% in 2024. The adjusted ROA displays less volatility and a slight upward trend overall, moving from 9.67% in 2020 to 10.90% in 2024. This implies that asset profitability improves over time when adjustments are made, with less pronounced fluctuations compared to the reported numbers.

Current Assets

The reported current assets increased from 4,591,400 thousand US dollars in 2020 to a peak of 5,907,700 thousand US dollars in 2022, followed by a decline to 5,401,800 thousand US dollars by 2024. This shows an overall upward trend until 2022, after which there is a noticeable decrease over the subsequent two years.

The adjusted current assets, which account for inventory LIFO reserve, display a similar pattern but with higher values across all periods. They rose steadily from 4,903,500 thousand US dollars in 2020 to 6,700,400 thousand US dollars in 2022. Afterward, a downward trend is observed, ending at 6,031,000 thousand US dollars in 2024. The gap between the reported and adjusted figures widens slightly over time, indicating an increasing impact of the LIFO reserve adjustment.

Current Ratio

The reported current ratio declined overall from 1.00 in 2020 to 0.79 in 2024, with a minor rebound to 0.99 in 2022 followed by continuous decreases in the following years. This suggests a weakening in the company's short-term liquidity position based on reported figures.

The adjusted current ratio, factoring in the LIFO reserve impact, shows a higher starting value of 1.07 in 2020, rises to a peak of 1.12 in 2022, and then decreases to 0.89 in 2024. Despite the decline after 2022, adjusted ratios remain consistently above the reported ratios, indicating that inventory valuation adjustments lead to a more favorable liquidity assessment.

Trend Summary

Overall, both reported and adjusted current assets increased significantly from 2020 to 2022 before trending downward through 2024. The current ratios reflect these asset changes but reveal a gradual weakening in liquidity, more pronounced in reported data. The adjustments for LIFO reserve increase the current asset base and improve the current ratio metrics, underscoring the importance of considering inventory valuation effects in the liquidity analysis over the period reviewed.

The financial data reveals varying trends in both reported and inventory LIFO reserve adjusted figures over the five-year period examined.

Net Income

Reported net income shows fluctuations, starting at 2,030,400 thousand US dollars in 2020, decreasing to 1,864,400 in 2021, recovering to 2,020,100 in 2022, and then increasing steadily to 2,388,800 in 2023 and 2,681,400 in 2024. Adjusted net income exhibits a more consistent upward trajectory, rising from 2,002,700 thousand US dollars in 2020 to 2,643,600 in 2024, with uninterrupted growth year-over-year, indicating a smoother income pattern when inventory adjustments are considered.

Net Profit Margin

The reported net profit margin experiences volatility, declining from 11.06% in 2020 to 9.35% in 2021, followed by a slight further decrease to 9.12% in 2022. Thereafter, it recovers to 10.36% in 2023 and improves further to 11.61% in 2024. Adjusted net profit margin shows a decreasing trend from 10.91% in 2020 to 9.82% in 2023, with a modest recovery to 11.44% in 2024. The adjusted margins are generally lower than the reported margins until the final year where the margins converge closely.

Overall, the data suggests that inventory adjustments smooth out fluctuations found in reported income and profit margins, reflecting potentially more stable underlying operational performance. The improvement in both reported and adjusted profitability in the last two years indicates a positive earnings trend strengthened further after considering the inventory LIFO reserve adjustments.

The financial data indicates a consistent upward trend in both reported and adjusted total assets from the end of 2020 through the end of 2024. Reported total assets increased steadily from 20,401,600 thousand US dollars to 23,632,600 thousand US dollars, reflecting overall growth in asset base. Adjusted total assets, which account for inventory LIFO reserve adjustments, also show a similar upward movement, rising from 20,713,700 thousand US dollars to 24,262,800 thousand US dollars over the same period. This suggests that after adjusting for inventory accounting methods, the company's asset growth remains strong and consistent.

Regarding asset efficiency, the reported total asset turnover ratio demonstrates a gradual increase from 0.90 in 2020 to a peak of 1.00 in 2023, followed by a slight decline to 0.98 in 2024. This upward trend through most of the period indicates improving effectiveness in utilizing assets to generate sales. However, the marginal drop in 2024 may warrant attention for potential causes.

The adjusted total asset turnover ratio follows a similar pattern but remains slightly lower than the reported figures throughout the years. Starting at 0.89 in 2020, it rises steadily to 0.98 by 2023 before decreasing to 0.95 in 2024. This consistent lag behind the reported turnover ratios suggests that when inventory valuation adjustments are considered, asset utilization is somewhat less efficient.

Overall, the data reflects an expanding asset base coupled with improving asset turnover ratios over the majority of the five-year period, indicating enhanced operational efficiency. The slight decline in asset turnover in the final year across both reported and adjusted figures may imply a need to monitor asset management practices closely to sustain efficiency gains.

The data indicates an overall upward trend in both reported and adjusted total assets from 2020 through 2024. Reported total assets increased from approximately 20.4 billion US dollars in 2020 to about 23.6 billion by 2024. Adjusted total assets, which account for inventory LIFO reserve adjustments, show a similar growing trajectory, rising from roughly 20.7 billion US dollars to close to 24.3 billion over the same period. This suggests a consistent expansion in the asset base when considering the LIFO reserve adjustments, with the adjusted figures consistently higher than the reported ones, reflecting the added value of the inventory adjustments.

Shareholders’ equity, on a reported basis, displayed some volatility. Dropping significantly in 2021 to about 2.4 billion US dollars from 3.6 billion in 2020, the equity then rebounded to 4.1 billion by 2024. The adjusted shareholders’ equity, which includes the inventory LIFO reserve adjustment, follows a similar pattern but with consistently higher values than reported equity. It declined in 2021 to approximately 3.0 billion from 3.9 billion but increased steadily afterwards, reaching about 4.7 billion in 2024. The adjustment reflects a more favorable equity position when factoring in the inventory valuation effects.

The financial leverage ratios, which measure the extent of debt used relative to equity, reveal a decreasing trend. Reported financial leverage peaked in 2021 at 8.48 and then steadily decreased to 5.83 by 2024. The adjusted financial leverage shows a similar downward trend but with somewhat lower leverage ratios than reported figures. It declined from 7.02 in 2021 to 5.18 in 2024. This decreasing leverage suggests the company’s reliance on debt financing relative to its equity base has been reducing, potentially reflecting a strengthening capital structure or improved equity levels when adjusting for inventory calculations.

Overall, the financial data presents a picture of gradual asset growth alongside fluctuating but recovering equity levels and a reduction in financial leverage. The adjustments for the inventory LIFO reserve consistently raise asset and equity values while reducing leverage ratios, indicating a somewhat stronger financial position than stated in reported data alone.

Net Income Trends

Reported net income experienced fluctuations over the five-year period, declining from 2,030,400 thousand US dollars in 2020 to 1,864,400 thousand US dollars in 2021, then recovering and growing steadily to reach 2,681,400 thousand US dollars by 2024. Adjusted net income, which accounts for the LIFO reserve, exhibited a consistent upward trend throughout the same period, rising from 2,002,700 thousand US dollars in 2020 to 2,643,600 thousand US dollars in 2024. This suggests underlying profitability improved when inventory valuation adjustments are considered.

Shareholders’ Equity Trends

Reported shareholders’ equity showed volatility, sharply decreasing from 3,610,800 thousand US dollars in 2020 to 2,437,200 thousand US dollars in 2021 before increasing steadily to 4,051,200 thousand US dollars in 2024. Adjusted shareholders’ equity, reflecting inventory LIFO reserve adjustments, consistently increased over the period from 3,922,900 thousand US dollars in 2020 to 4,681,400 thousand US dollars in 2024. The adjustment highlights a more stable and growing equity base than that indicated by reported figures alone.

Return on Equity (ROE) Analysis

Reported ROE demonstrated high variability, peaking at 76.5% in 2021 after rising from 56.23% in 2020, then declining to 64.29% in 2023 before a modest rise to 66.19% in 2024. Adjusted ROE followed a similar pattern but at consistently lower levels: starting at 51.05% in 2020, increasing to 70.8% in 2021, and then declining more markedly to 51.65% in 2023 before recovering somewhat to 56.47% in 2024. The adjusted ROE figures provide a perspective that accounts for inventory accounting effects, indicating a steadier but less volatile measure of profitability relative to equity.

Overall Insights

The data reveals that adjustments for the LIFO reserve significantly affect the interpretation of profitability, equity strength, and return metrics. While reported figures show more pronounced fluctuations, adjusted values depict a smoother and generally positive growth trend in net income and equity. This suggests that inventory accounting methods impact financial assessments and that incorporating these adjustments may provide a more accurate reflection of the company’s financial health and performance trends over time.

The financial data reveals several notable trends in the company’s performance over the five-year period examined. Net income, both reported and adjusted for the inventory LIFO reserve, shows an overall upward movement. Reported net income declined slightly in 2021 but subsequently increased each year, reaching its highest point in 2024. Adjusted net income exhibits consistent growth throughout, indicating that adjustments related to inventory accounting have had a positive impact on the profitability figures reported.

Total assets, when reported and adjusted, also demonstrate a steady increase from 2020 through 2024. Adjusted total assets consistently exceed reported total assets, reflecting the upward adjustment for inventory values. The gradual rise in total assets over time suggests ongoing asset growth or revaluation, with no evident signs of contraction or instability.

Return on Assets (ROA) metrics provide further insight into operational efficiency and profitability. The reported ROA experienced a dip in 2021 and 2022, followed by a recovery and strengthening in the last two years under review. Conversely, the adjusted ROA remains relatively stable, with minor fluctuations but no pronounced decline. The adjusted figures suggest a more consistent profitability trend when accounting for inventory valuation adjustments. In 2024, both reported and adjusted ROA reach their highest levels in the period, indicating improved asset utilization and earnings generation.

Overall, the data depicts a company with rising profitability and asset base, enhanced by inventory accounting adjustments which provide a smoother and often higher measure of net income and asset value. The improving ROA in the final years further emphasizes effective management of assets to generate income. This suggests positive momentum in financial health and operational performance as of the latest reporting period.