The home improvement industry’s prospects look steady, thanks to increasing urbanization and robust consumer spending. Therefore, I think quality home improvement stocks Sherwin-Williams Co. (SHW), Masco Corp. (MAS) and Snap-on Incorporated (SNA) might be solid investments now.
The DIY home improvement market in the US is expanding as a result of main vendors’ e-commerce, free pickup, and delivery services. Consumers enjoy a nice shopping experience as well as the convenience of home delivery, which leads to an increase in online purchases. The global DIY home improvement market is expected to reach $128.76 billion by 2029, growing at a CAGR of 3.9%.
The global home improvement market is predicted to increase at a CAGR of 6.7% to reach $575.5 billion by the end of 2030. Increased urbanization, rising disposable incomes, and a greater focus on home restoration and renovation are some of the causes contributing to this growth.
Considering these conducive trends, let’s take a look at the fundamentals of the three best Home Improvement & Goods stocks, starting with number 3.
Stock #3: Sherwin-Williams Co. (SHW)
SHW engages in the manufacture, distribution, and sale of paints, coating, and related products to professional, industrial, commercial, and retail customers. It operates through three segments: The Americas Group; Consumer Brands Group; and Performance Coatings Group.
SHW’s trailing-12-month levered FCF margin of 10.09% is 142.1% higher than the 4.17% industry average. Its trailing-12-month ROCE of 75.85% is 862.7% higher than the 7.88% industry average.
In the fiscal third quarter that ended September 30, 2023, SHW’s net sales increased marginally year-over-year to $6.12 billion. Its gross profit came in at $2.92 billion, up 12.6% year-over-year. The company’s net income and adjusted EPS increased 11.2% and 13.1% year-over-year to $761.50 million and $3.20, respectively.
Analysts expect SHW’s revenue to increase 3.7% year-over-year to $22.98 billion for the year ending December 2023. Its EPS is expected to grow at 17.9% year-over-year to $10.30 for the same period. It surpassed EPS estimates in three of four trailing quarters. Shares of SHW have gained 13.7% over the past year to close the last trading session at $245.32.
SHW’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
SHW also has an A grade for Quality and a B for Sentiment. It is ranked #14 out of 58 stocks in the B-rated Home Improvement & Goods industry. Click here for the additional POWR Ratings for Growth, Value, Stability, and Momentum for SHW.
Stock #2: Masco Corp. (MAS)
MAS is a designer, manufacturer and distributor of home improvement and building products. The Company’s segments include Plumbing Products and Decorative Architectural Products.
MAS’ trailing-12-month non-GAAP P/E of 14.50x is 12.9% lower than the industry average of 16.66x. Its trailing-12-month EV/EBIT of 11.60x is 21.2% lower than the industry average of 14.72x.
MAS’ trailing-12-month ROTC of 25.12% is 267% higher than the 6.85% industry average. Its trailing-12-month ROTA of 15.49% is 210.4%% higher than the 4.99% industry average.
During the third quarter that ended on September 30, 2023, MAS’ came in at $1.98 billion. Its gross profit rose 7.1% from its year-ago value to $744 million. The company’s profit for the year increased 14.2% year-over-year to $249 million, while its EPS stood at $1.10, up 13.4% from the prior-year value.
Street expects MAS’ revenue to increase marginally year-over-year to $7.98 billion for the year ending December 2024. Its EPS is expected to grow at 6.5% year-over-year to $3.96 for the same period. The stock gained 22.1% over the past year to close the last trading session at $53.87.
It’s no surprise that MAS has an overall B rating, equating to a Buy in our POWR Ratings system. It has a B grade for Sentiment and Quality. It is ranked #12 in the same industry.
Beyond what is stated above, we’ve also rated MAS for Growth, Value, Momentum and Stability. Get all MAS ratings here.
Stock #1: Snap-on Incorporated (SNA)
SNA manufactures and markets tools, equipment, diagnostics, repair information, and systems solutions for professional users worldwide. It operates through Commercial & Industrial Group; Snap-on Tools Group; Repair Systems & Information Group; and Financial Services segments.
SNA’s forward non-GAAP P/E multiple of 14.11 is 15.3% lower than the industry average of 16.66. Its forward EV/EBIT multiple of 10.79% is 26.7% lower than the industry average of 14.72.
SNA’s trailing-12-month levered FCF margin of 13.80% is 126.6% higher than the industry average of 6.09%. Its trailing-12-month net income margin of 19.66% is 220.4% higher than the industry average of 6.14%.
For the fiscal third quarter, which ended on September 30, 2023, SNA’s net sales increased 5.2% year-over-year to $1.16 billion, while its gross profit rose 8.6% from the year-ago value to $578.20 million.
In addition, the company’s attributable net earnings grew 8.6% and 8.9% from the prior-year quarter to $243.10 million and $4.51 per share, respectively.
The consensus revenue estimate of $4.73 billion for the year ending December 2023 represents a 5.4% increase year-over-year. Its EPS is expected to grow at 10.9% year-over-year to $18.66 for the same period. It surpassed EPS estimates in all four trailing quarters. SNA’s shares have gained 19.7% over the past year to close the last trading session at $263.37.
SNA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked #9 in the same industry. It has an A grade for Quality and a B for Stability and Momentum. To see additional SNA’s ratings for Growth, Value and Sentiment, click here.
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SHW shares were trading at $250.70 per share on Friday afternoon, up $5.38 (+2.19%). Year-to-date, SHW has gained 6.44%, versus a 15.00% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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