Initiated 2026-10-29 · Price $118.44 (as of 2026-10-28 close, stockanalysis) · Mkt cap $26.33bn (222.3mm shares) · Materials / paints & coatings · Model: verified

Rating: Hold — Conviction: Low

PPG is a high-quality, A3/BBB+ global coatings franchise trading at 13.9x forward earnings, well below Sherwin-Williams and RPM. The discount is earned, though. Sales have been flat for three years ($16.2bn FY2023, $15.9bn FY2025, continuing operations), adjusted EBITDA margin has gone nowhere, and Industrial Coatings is absorbing input-cost inflation just as Brent sits near $110. A Base case that restores the 2024 margin and grows about 3% a year is worth roughly today's price on the exit-multiple method and less on the Gordon method. Hold, with the downside skew stated plainly.

Conviction tests (3a-v-c): T1 fail (Base −20.3% at +1pp → Sell; +1.4% at −1pp → Hold) · T2 fail (Gordon $95.12 (−19.7%) → Sell; exit $116.10 (−2.0%) → Hold) · T3 pass (revenue from EDGAR XBRL; adj. EBITDA, NWC, debt, cash, shares from 8-K releases and the Q3 10-Q; no est facts) · T4 pass (no pending deal, litigation or regulatory event outside the cases)

Model value range vs price
Bear $56.23Base $105.61Bull $146.32Price $118.44

Business overview

PPG sells paints, coatings and specialty materials in more than 70 countries. FY2025 sales were $15.9bn across three segments: Industrial Coatings ($6.5bn: auto OEM, packaging, general industrial), Performance Coatings ($5.5bn: aerospace, auto refinish, protective and marine, traffic) and Global Architectural Coatings ($3.8bn: EMEA, Latin America and Asia, since the U.S./Canada business was sold in December 2024). Earnings turn on three things. The first is volume in industrial end-markets and European construction. The second is the spread between selling prices and oil-derived raw materials (resins, solvents, pigments). The third is mix, since Performance earned a 23.9% segment EBITDA margin in Q3 2026 against Industrial's 14.4%. Q3 2026 sales rose 7% (organic +5%) to $4.35bn. Management narrowed FY2026 adjusted EPS guidance to $7.90–8.10.

Competition

On PCI's 2026 Global Top 10 (2025 sales), Sherwin-Williams leads at ~$19.8bn of coatings sales, PPG is second at $15.9bn, and AkzoNobel and Nippon Paint are each around $11bn. The AkzoNobel–Axalta all-share merger was approved by both companies' shareholders on 2026-08-05. Closing is expected late 2026 to early 2027, subject to regulators. The combination would have about $16.2bn of 2025 coatings sales, overtaking PPG in auto refinish, auto OEM and industrial, where Axalta competes directly. Pressure would show up first as price in contract-indexed Industrial and Refinish business, where PPG already reported a high-single-digit refinish organic decline for the first nine months. Sherwin, the closest listed comparable, trades at 24.8x forward earnings on its North American architectural store network, a business PPG no longer owns.

Bull case

  1. Performance mix and aerospace — Aerospace organic sales grew double digits through nine months with a strong order backlog. Every point of mix toward Performance lifts the group margin. Plays out if aerospace build rates keep rising and refinish volumes stabilise in 2027. Model: rev_growth, ebitda_margin
  2. Industrial recovery on a reset cost base — After $377mm of 2024 restructuring, a volume recovery in auto OEM and general industrial would lift margin back above 18% toward ~19.5%. Plays out if global industrial production turns up and raw materials ease. Model: rev_growth, ebitda_margin
  3. Multiple normalisation — EV/EBITDA has fallen from 16.6x (FY2022) to 11.0x (FY2025) on the source's basis. Visible growth would reverse part of that de-rating. Model: exit_ev_ebitda

Bear case

  1. Industrial and European volume downturn — Industrial is 41% of sales and EMEA architectural is construction-linked. A 2027 industrial recession would cut volume on high fixed costs. Plays out if U.S. and European manufacturing PMIs roll over. Model: rev_growth, ebitda_margin
  2. Raw-material squeeze — Industrial margins compressed in Q3 on input-cost inflation, and Q4 guidance repeats it. Q2 pricing covered only ~90% of COGS inflation (call coverage, secondary). Plays out if Brent holds above $100 and contract index pricing lags. Model: ebitda_margin
  3. Structural low growth and a scaled rival — Three years of flat sales, a larger Akzo–Axalta in PPG's industrial and refinish markets, and a de-rating toward diversified-chemicals multiples. Model: rev_growth, exit_ev_ebitda

Valuation & balance sheet

Metric (definition) Current Own history (range or 5y avg) Peers Source, as-of
P/E forward (consensus) 13.9x TTM P/E 14.6x (FY2025) – 28.8x (FY2022) SHW 24.8x · RPM 16.2x · AXTA 12.7x stockanalysis, 2026-10-28
EV/EBITDA, model basis (mkt cap − cash + debt + NCI/pension claims ÷ FY2025 adj. EBITDA; ex-leases) 11.9x 11.0x–20.5x FY2021–25 (stockanalysis basis, reported EBITDA) RPM 12.2x · AXTA 9.9x (stockanalysis basis) 8-K/10-Q; stockanalysis, 2026-10-28
FCF yield (TTM) 5.3% P/FCF 18.6x–62.0x FY2021–25 SHW 4.0% · RPM 5.6% · AXTA 6.7% stockanalysis, 2026-10-28
Dividend yield 2.5% — SHW 1.0% · RPM 2.3% · AXTA none stockanalysis, 2026-10-28

Model-implied value range (from model-summary.json; generic module, Gordon-growth DCF and exit-EV/EBITDA DCF, midpoints): Bear $56.23 · Base $105.61 · Bull $146.32 per share, i.e. implied returns of −52.5% / −10.8% / +23.5% vs $118.44. These ranges show how the bull and bear drivers translate into value; they are not price targets. The price sits above Base and about a third of the way from Base to Bull, so the market is already paying for some of the margin recovery. The Base exit multiple of 11.0x is a ~8% de-rating from today's 11.9x. The Gordon method is 22% below the exit method ($95.12 vs $116.10), so it embeds a further de-rating at a 9.0% WACC. The rating turns on that gap. No tail run: no customer or product is ≥50% of sales, and the bear is a break, not a plateau.

Balance sheet: net leverage 1.9x FY2025 adj. EBITDA (net debt $5.2bn), coverage 12.0x, liquidity $1.64bn cash and short-term investments plus an undrawn $2.3bn revolver and no commercial paper. The nearest material maturity is $686mm of short-term debt and current LTD (incl. the 1.400% 2027 notes). Ratings: Moody's A3, S&P BBB+, Fitch BBB+.

Model note: Built and verified (LibreOffice recalculation matched all 3,207 formula cells). Unverified inputs: none. Assumptions without basis: none. Scenario consistency CHECKs: none. FY0 = FY2025 continuing operations, with balance-sheet facts at 2026-09-30. other_claims of $1,074mm carries NCI plus pre-tax pension and OPEB liabilities; excluding pension/OPEB would add ~$4.20/sh. WACC 9.0% equals the CAPM arithmetic in its basis (10Y 5.05%, β 1.05, 5% ERP, 5.6% pre-tax debt, 79/21 weights = 9.07%), with no haircut. The debt coupons and the weighted maturity are aggregate estimates; they have no value effect. Base Y1 EPS $7.81 is 2.4% below the $8.00 guidance midpoint, within tolerance.

Relative value vs peers
MetricPPGSHWRPMAXTAPeer medianvs median
P/E (TTM)16.9x29.6x18.4x21.3x21.3x−21%
P/E (forward)13.9x24.8x16.2x12.7x16.2x−15%
PEG1.8x2.3x1.7x1.6x1.7x+8%
P/B3.1x19.4x3.6x2.9x3.6x−14%
FCF yield (TTM)5.3%4.0%5.6%6.7%5.6%−0.2pp
Dividend yield2.5%1.0%2.3%0.0%1.0%+1.5pp
P/E (TTM)SHW29.6xAXTA21.3xRPM18.4xPPG16.9x
P/E (forward)SHW24.8xRPM16.2xPPG13.9xAXTA12.7x
PEGSHW2.3xPPG1.8xRPM1.7xAXTA1.6x
P/BSHW19.4xRPM3.6xPPG3.1xAXTA2.9x
FCF yield (TTM)AXTA6.7%RPM5.6%PPG5.3%SHW4.0%
Dividend yieldPPG2.5%RPM2.3%SHW1.0%AXTA0.0%

As of 2026-10-29. One source and one definition for every company: stockanalysis TTM and consensus-forward figures as the source defines them. Not the model's own EV basis. All quotes at the 2026-10-28 close Dashed line = peer median. Source: stockanalysis.com /stocks/<ticker>/statistics/, fetched 2026-10-29.

Notes. Omitted: the source showed no EV/EBITDA for PPG or SHW on 2026-10-28 (RPM 12.21x, AXTA 9.94x). PPG on the model basis is ~11.9x FY2025 adjusted EBITDA (see the report). SHW's P/B reflects years of buybacks shrinking book equity; not comparable. Axalta pays no dividend (0).

Scenario stress test

Reasoned from the bull/bear drivers above. The model column comes from the scenario overlays (Base case + shock).

Scenario Effect Mechanism Magnitude Model Δ value vs Base ($/sh)
S1 Fast equity crash − Beta ~1.05 large cap de-rates with the market; no operating channel Med −$12.28
S2 Slow bear / recession − Industrial, auto OEM and EMEA volume falls, margin −2.5pp, trough multiple. About half of Base − Bear ($49.38) on purpose: a two-year dip, not the bear's permanent margin reset plus a 10% WACC High −$23.57
S3 Rapid rate shock − +1pp discount rate on a mid-teens-multiple compounder; fixed-rate debt mutes the interest channel High −$16.76
S4 Slow rate grind − Same channel, slower; housing- and construction-linked architectural demand grinds Med −$11.07
S5 Soft-landing cuts + Lower rates, steady industrial demand and a European construction recovery High +$15.89
S6 Recession-driven cuts − Volume loss outweighs the lower discount rate Med −$7.50
S7a Credit liquidity shock − A3/BBB+ with undrawn revolver; multiple compresses with risk assets, no funding stress Low −$6.14
S7b Slow default cycle − Stress among industrial OEMs and distributors trims volume Med −$8.12
S8 Stagflation − Oil-derived inputs inflate faster than price; nominal sales up Med −$9.17
S9a Dollar spike − About half of sales outside the U.S. translate lower Med −$7.07
S9b Dollar slide + Translation tailwind Low +$6.04
S10 Melt-up + Lower-beta cyclical participates modestly Low +$6.14
S11 Energy supply shock − Feedstock spike hits margin with a 1–2 quarter lag before pricing catches up; modeled as a two-year margin dip Low −$4.42
S12 Mega-cap/AI derating + Rotation into cheaper industrial cyclicals; no operating channel Low +$3.07

Currently active/on watch per the playbook: S3 partially active (10Y 5.05% on 2026-10-28); S8, S10 and S11 on watch.

Model value change vs Base, by scenario
S2 Slow bear / recession−$23.57S3 Rapid rate shock−$16.76S1 Fast equity crash−$12.28S4 Slow rate grind−$11.07S8 Stagflation−$9.17S7b Slow default cycle−$8.12S6 Recession-driven cuts−$7.50S9a Dollar spike−$7.07S7a Credit liquidity shock−$6.14S11 Energy supply shock−$4.42S12 Mega-cap/AI derating+$3.07S9b Dollar slide+$6.04S10 Melt-up+$6.14S5 Soft-landing cuts+$15.89

What would change the call

Upgrades if: organic growth runs ≥3% for two consecutive quarters with Industrial segment EBITDA margin back above 15%, or the price falls toward the low $90s with the Base case intact. Downgrades if: the 2027 guide implies flat-to-down adjusted EPS, Industrial margin compression persists into H1 2027, or the 10Y holds well above 5% (the rating is Sell at +1pp).

Watch items

Sources