Sherwin Williams (SHW) and PPG (PPG)
Introduction
Sherwin Williams is an organization that was established in 1866 and its main objective is to manufacture as well as distribution of coatings and also related products. The company has had increment in their annual dividends over the years since 1979. Their target is on professionals, industries, businesses and retail customers both in North and South of United states. Also they focus on carrying business in the Caribbean, Europe as well as in Asia region (SHW 2015). They have around 40706 employees and their stock style is regarded as one with a large growth. PPG Company is one of the competing companies that compete in the market with the SHW. Pittsburgh Plate Glass (PPG) is a company that was established in Pennsylvania in 1883 and is currently a global business that deals with global supply of paints; ophthalmic products, coatings, field supplies, glass and also strong glass (PPG 2015). This corporation focuses on a management in modernization, sustainability and paint and ensures that they develop more exteriors in better methods than any other enterprise through helping their customers who include a wide range of aftermarkets, construction markets, consumer goods, transportation and industrial. The company has around 47000 employees all over the world. The company operates in 70 different countries in the world and is among the American fortune forty companies (Plunkett et al 2006). This paper therefore will make comparisons between the two companies basing on their current financial reports. It will also focus on the analysis of the two financial companies so as to determine which company is better than the other in their performance. It will also discuss on some of the recommendations that would help the poor performing company so that the company can be able to attain its superior financial performance. Also it will focus on what the better performing company can improve on so as to continue doing better.
Financial analysis of SHW
According to the2015 financial report of the SHW industry, the company increased its cash dividend by 21.8 % thus one share cost $2.68 and the company was able to procure 3.58 million shares in the market. The average common shares that are diluted amounted to 94 million. The net sales amounted to $11.339 while the net income amounted to $1054 while the shareholders equity amounted to $868 with a net working capital of $517 and the total assets amounted to $5792 while the total number of shares is 92,197 thousands and cash dividends of $2.68. The returns on sale amounted to 9.3%. The numbers of shareholders who are recorded amounted to 6,987 with a total number of 40,706 employees while the sales of $279 thousands per employee. The corporation’s monetary status, liquidity and cash flow has sustained to be strong especially due to the net operating cash that was crowned $1.000 billion due to the improved operating results in the painting stores. As compared to the 2014 report, the net income has increased up to $630.9million due to the decrease in liabilities and the increment in the current asserts. The short term debts have decreased with $640.0 million as a result of the resilient cash flow and the giving out of the long-standing debt. The net functioning money amounting to $365.9 million increased to $1.447 billion in 2015 while the working capital reduced to $188.9 million because of the timing of payments. Due to the strong net operating cash, the company has been able to capitalize in new-fangled stocks, industrial as well as supply facilities, renovation and payment of dividends to the shareholders. The company has been able to use cash and cash equivalents on hand so as to buy treasury stock of $1.035. The free cash flow amounts to $963,476 (SHW 2015).
Financial analysis of PPG
According to the 2015 financial report of PPG Company, the company’s dividends had amounted to $383 million while the latest quarterly dividend of 36 cents was sanctioned by the board of directors on 21st January 2016 and would be payable in 11th March 2016 by the shareholders in the record as at 19th February 2016. The dividend per share was $1.41.The number of shareholders of the common stock was seen to be 14,435 in 31st January 2016. The net sales in the company amounted to $15,330 while the income from the continuing operations amounted to $1,405 while that from discontinuing operations amounted to $1. The return on average capital amounted to $15.8 while the operating cash flow from the continuing operations amounted to $1,837 while the capital spending amounted to $796 and their shareholders equity amounted to $4,983. As compared to the 2014 report, the net sales decreased by $30 million while the cost of sales excluding depreciation and amortization reduced by $200. There was increase in the cash flow due to the increase in the continual of operations and income from acquired investments. Operating working capital had reduced by $113 million (PPG 2015).
Results from the analysis
Basing on the financial analysis that has been done in the above section of the paper, it is quite clear to say that SHW Company has demonstrated a positive pattern of technical signs though it has been undervalued due to its price level. The company has proved to have a good long term investment as it has shown it’s capable due to its defensive nature and this means that there is an opportunity for further appreciation in price in the company. However, PPG has more power than SWH this is attributed by the high dividend yield.
The PPG has also larger revenue as compared to SHW Company while it also produces more revenue per each employee as compared to the SHW Company. The PPG Company also produces $1.16 in revenue for every $1 of the expense while that of the SHW produces only $1.12 which is lower than that of PPG. PPG has more levered free cash flow as compared to that of the SHW incorporation. However, the SHW Company has higher growing revenue while the PPG company revenue is shrinking and therefore the stock price in the market cap is higher for SHW and lower in PPG Company. This has therefore attributed to a higher rating for the SHW Company. Therefore the SHW has shown greater performance as it has higher cash flow ratio to the total debts as compared to PPG and has higher interest coverage as compared to PPG. SWH Company is the best performing as its debts compared to the value of the business is lower than that of the PPG. It is therefore recommended that the company should improve on the quality of their products so as to increase their sales. Innovation is another recommendation that should be implemented in the business and this will enhance the companies to be able to reach out to the customers who are interested in the new and modified products. Employees ought to be encouraged through appreciations during high sales so as to motivate them for their good work and continuous motivation will enable them to improve on their services and hence their yield. The companies should also advance their technology so as to enhance them reduce on some expenses such as cutting off of some employees, saving on advertisements and quality and fast operations through the new and advanced technology. All these practices will see the companies yield increasing and hence they will be able to clear off their debts, purchase more assets, increase on the payment of returns to shareholders through payment of dividends and increase in returns and profits in general.
Conclusion
PPG and SHW have proven to be two competing companies that are determined to succeed. They have all offered wide opportunities for employment and they have all contributed towards the growth of the society. Their performances differ and this makes the difference in their sales and ratings. The two companies were started many years ago and they have showed great improvement in their operations over time and the annual growths that they have been able to have over those years. It is evident that the future if these two companies will involve a lot of changes in their organizations and this will result to their success. The two companies have debts which they pay as they operate in their business. Financial analysis is important as it enables the companies to be able to rate their performances and their financial standpoint.
References
Plunkett, J. W., & Plunkett Research, Ltd. (2006). Plunkett's engineering & research industry almanac 2006: The only comprehensive guide to the engineering & research industry. Houston, Tex: Plunkett Research.
PPG. (2015). Annual Report 2015.
SHW. (2015). Annual Report.
