RPM Stock Study (1-14-26)

Posted by Mark on June 10, 2025 at 06:44 | Last modified: January 15, 2026 12:24

I recently studied RPM International Inc. (RPM, $111.68).

M* writes:

     > RPM International Inc. manufactures and sells a variety of paints,
     > coatings, and adhesives. The firm organizes itself into four
     > segments based on product type. The construction products
     > group sells coatings, roofing, insulation, and other products to
     > distributors, contractors, and end consumers globally. The
     > performance coatings group produces coatings that are used in
     > construction and industrial applications like floorings and
     > corrosion control. The consumer group sells paint, finishes,
     > and similar products to individual consumers through hardware
     > and craft stores. The specialty products group sells a line of
     > products ranging from niche applications of the other groups
     > to marine finishes, to edible food colorings.

Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 5.5% and 12.4%, respectively (references to year on BI website incremented by 1 to align with FY ending 5/31). Lines are mostly up, straight, and parallel except for sales dip in ’20 and EPS dips in ’17 (large due to non-recurring $188.3 million impairment charge related to the Kirker nail enamel business and a $12.3 million non-recurrent charge for exiting a business in the Middle East per Google AI), ’19, ’22, and ’23. Shares outstanding decrease 6.2% (0.65% per year). Five- (10-) year EPS R^2 is 0.71 (0.71) and Value Line (VL) gives an Earnings Predictability score of 90.

Over the past decade, PTPM trails industry averages but is about even with peers while ranging from 4.9% in ’17 to 10.9% in ’21 with last-5-year mean of 10.1%. ROE leads peer and industry averages while ranging from 14.2% in ’17 to 32.4% in ’21 with last-5-year mean of 26.6%. Debt-to-Capital is greater than peer and industry averages while ranging from 49.0% in ’24 to 68.8% in ’20 with last-5-year mean of 55.6%.

Quick Ratio is 1.2 and Interest Coverage 8.5 per M* who assigns “Narrow” [quantitative] Economic Moat and gives a B grade for Financial Health (per BI website). VL rates the company A for Financial Strength and reports Interest Coverage of 9.2.

With regard to sales growth:

• YF gives YOY ACE 5.1% and 3.9% for ’26 and ’27, respectively (based on 14 analysts).
• Zacks gives YOY ACE 5.3% and 3.7% for ’26 and ’27 respectively (6 analysts).
• VL projects 2.7% annualized growth from ’25-’29.
• CFRA projects 6.0% YOY and 4.5% per year for ’26 and ’25-’27, respectively.
• M* gives 2-year ACE of 4.6% per year.

My 2.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 7.6% and 6.1% per year for ’25-’27 and ’25-’28, respectively (based on 19 analysts).
• Nasdaq.com reports ACE 13.0% YOY and 10.4% per year for ’27 and ’26-’28 (8 / 7 / 4 analysts for ’26 / ’27 / ’28).
• Seeking Alpha projects 4-year annualized growth of 8.1%.
• Finviz gives ACE 5-year annualized growth of 7.6% (1).
• LSEG estimates LTG at 7.2%.
• YF gives YOY ACE 0.6% contraction and 13.8% growth for ’26 and ’27, respectively (14).
• Zacks gives YOY ACE growth of 1.5% and 13.0% for ’26 and ’27 along with 5-year annualized growth of 7.8% (7).
• VL projects 3.8% annualized growth from ’25-’29.
• CFRA projects growth of 5.7% YOY and 8.2% per year for ’26 and ’25-’27 along with 3-year CAGR of 8.0%.
• M* gives long-term annualized growth ACE of 10.0%.

My 4.0% forecast is near bottom of the long-term estimate range (mean of six: 7.4%). Initial value is ‘2026 Q2 EPS of $5.19/share (TTM) rather than ’25 EPS of $5.35.

My Forecast High P/E is 19.0. Over past 10 years, high P/E ranges from 19.6 in ’16 to 41.5 in ’17 with a last-5-year mean of 26.8 and a last-5-year-mean average P/E of 22.8. I am below the range.

My Forecast Low P/E is 14.0. Over past 10 years, low P/E ranges from 14.0 in ’16 to 34.0 in ’17 with a last-5-year mean of 18.8. I am forecasting at bottom of the range.

My Low Stock Price Forecast (LSPF) is $78.00. Default ($72.70) based on initial value given above is excessively low at 34.9% less than previous close and 23.7% less than 52-week low. My (arbitrary) selection is 30.2% and 18.2% less, respectively.

Over the past 10 years, Payout Ratio (PR) ranges from 37.2% in ’25 to 86.4% in ’17 with a last-5-year mean of 40.3%. I am forecasting below the range at 37.0%.

These inputs land RPM in the SELL zone with a U/D ratio of 0.2. Total Annualized Return (TAR) is 3.4%.

PAR (using Forecast Average—not High—P/E) of 0.8% is unthinkable for an investment candidate. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead but even that is less than the risk-free rate (T-Bills).

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 36 studies in the past 90 days (my study and 8 other outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 4.3%, 8.0%, 25.8, 17.9, and 40.3% respectively. I am lower across the board. VL projects a future average annual P/E of 22.5 that is greater than MS (21.9) and greater than mine (16.5).

MS high / low EPS are $7.83 / $5.28 versus my $6.31 / $5.19 (per share). My high EPS is less due to a lower growth rate. VL high EPS of $6.20 undercuts both.

MS LSPF of $85.00 implies a Forecast Low P/E of 16.1 versus the above-stated 17.9. MS LSPF is 10.1% less than the default $5.28/share * 17.9 = $94.51 resulting in more conservative zoning. MS LSPF is still 9.0% greater than mine, however.

MOS is robust in the study because my inputs are near or below historical/analyst/MS averages/ranges. Also supporting this assessment is MS TAR exceeding mine by 11.3% per year (too much, actually) and a higher LSPF.

With regard to valuation, PEG is 2.7 and 5.2 per Zacks and my projected P/E, respectively: both overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is fair at 0.94.

Per U/D, RPM is a BUY under $88.50/share. BI TAR criterion would be met [119.9 / ((12.97 / 100 ) +1 ) ^ 5] ~ $65 given a forecast high price ~$120.

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