Head-To-Head Review: Tractor Supply (TSCO) versus Sherwin-Williams (SHW)

Tractor Supply (NASDAQ: TSCO) and Sherwin-Williams (NYSE:SHW) are both retail/wholesale companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, profitability, valuation, dividends, earnings, institutional ownership and analyst recommendations.

Earnings and Valuation

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This table compares Tractor Supply and Sherwin-Williams’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Tractor Supply $7.26 billion 1.02 $422.59 million $3.33 17.98
Sherwin-Williams $14.98 billion 2.49 $1.77 billion $14.27 27.80

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

Insider & Institutional Ownership

84.1% of Tractor Supply shares are held by institutional investors. Comparatively, 75.6% of Sherwin-Williams shares are held by institutional investors. 1.6% of Tractor Supply shares are held by insiders. Comparatively, 0.8% of Sherwin-Williams shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Tractor Supply 5.82% 30.81% 14.76%
Sherwin-Williams 11.83% 50.59% 8.05%

Analyst Recommendations

This is a summary of current ratings for Tractor Supply and Sherwin-Williams, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Tractor Supply 1 13 9 0 2.35
Sherwin-Williams 0 9 14 1 2.67

Tractor Supply presently has a consensus target price of $72.83, suggesting a potential upside of 19.83%. Sherwin-Williams has a consensus target price of $435.70, suggesting a potential upside of 9.82%. Given Tractor Supply’s higher possible upside, research analysts plainly believe Tractor Supply is more favorable than Sherwin-Williams.

Dividends

Tractor Supply pays an annual dividend of $1.08 per share and has a dividend yield of 1.8%. Sherwin-Williams pays an annual dividend of $3.44 per share and has a dividend yield of 0.9%. Tractor Supply pays out 32.4% of its earnings in the form of a dividend. Sherwin-Williams pays out 24.1% 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 39 consecutive years.

Risk & Volatility

Tractor Supply has a beta of 1.28, suggesting that its share price is 28% more volatile than the S&P 500. Comparatively, Sherwin-Williams has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500.

Summary

Sherwin-Williams beats Tractor Supply on 12 of the 18 factors compared between the two stocks.

About Tractor Supply

Tractor Supply Co. engages in the retail sale of farm and ranch products. It operates retail farm and ranch stores and focuses on supplying the lifestyle needs of recreational farmers and ranchers, as well as tradesmen and small businesses. The company operates its retail stores under the names: Tractor Supply Company, Del’s Feed & Farm Supply, and Petsense. Its product categories includes clothing and footwear; dog, cat and pet supplies; trailers and accessories; lawn and garden supplies; propane and heating supplies; tools and gun safes; fending; welders and welding supplies; and lawn mowers and power generators. The company was founded by Charles E. Schmidt, Sr. in 1938 and is headquartered in Brentwood, TN.

About Sherwin-Williams

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 Caribbean, Europe, Asia, and Australia. The company operates in three segments: The Americas Group, Consumer Brands Group, and Performance Coatings Group. The Americas Group segment offers architectural paint and coatings, protective and marine products, as well as OEM product finishes and related products through dealers, home centers, distributors, hardware stores, and other retailers. As of December 31, 2017, this segment operated 4,620 company-operated specialty paint stores. The Consumer Brands Group segment provides architectural paints, stains, varnishes, industrial products, wood finish products, wood preservatives, applicators, corrosion inhibitors, aerosols, caulks, and adhesives. The Performance Coatings Group segment offers industrial coatings for wood finishing and general industrial applications, automotive refinish products, protective and marine coatings, coil and packaging coatings, and performance-based resins and colorants; and specialty coatings through direct sales staff and outside sales representatives to retailers, dealers, jobbers, licensees, and other third party distributors. This segment operated 290 company-operated branches. The Sherwin-Williams Company was founded in 1866 and is headquartered in Cleveland, Ohio.

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