PPG PPG Industries
Sticky specialty coatings franchise, but flat growth means the price already pays for its prospects.
The business
PPG makes and sells paints, coatings, and specialty materials: automotive OEM and refinish coatings, aerospace sealants and transparencies, industrial and packaging coatings, and architectural paint (mainly Latin America after it sold US/Canada architectural in 2024). It earns money by formulating these products and selling them to manufacturers, body shops, and contractors. Coatings are a small share of the customer's total cost but critical to performance, so customers rarely switch for price alone.
Quality gate · 70/100
Moat & management
| Moat | narrow moat |
| Source | switching costs |
| Trajectory | stable |
| Management | adequate |
OEM and aerospace coatings require lengthy spec qualification, and refinish shops are locked in through color-matching systems and databases, so share is sticky and pricing pass-through has worked historically. But PPG faces strong peers (Sherwin-Williams, Axalta, AkzoNobel), volumes are cyclical, and it lacks Sherwin's store-network brand moat; ROIC around 11% is good, not exceptional.
Portfolio pruning (exiting US architectural and silicas) and steady buybacks at roughly 1.7%/yr show discipline, but a decade of flat revenue and earlier acquisitive empire-building yielded mediocre organic growth; debt near 2x EBITDA is sensible.
Owner-earnings inputs
| Owner earnings (TTM) | 1.41B |
| Owner-earnings yield | 6.0% |
| Free-cash-flow yield | 6.0% |
| Growth used (normalized) | 5.0% |
| Market-implied growth (reverse DCF) | 5.9% |
| Terminal growth | 3.0% |
| Discount rate (hurdle) | 10.0% |
Projected owner earnings
| Yr | Owner earnings | Growth | PV |
|---|---|---|---|
| 1 | 1.48B | 5.0% | 1.34B |
| 2 | 1.55B | 4.8% | 1.28B |
| 3 | 1.62B | 4.6% | 1.22B |
| 4 | 1.69B | 4.3% | 1.15B |
| 5 | 1.76B | 4.1% | 1.09B |
| 6 | 1.83B | 3.9% | 1.03B |
| 7 | 1.89B | 3.7% | 970.32M |
| 8 | 1.96B | 3.4% | 912.32M |
| 9 | 2.02B | 3.2% | 855.95M |
| 10 | 2.08B | 3.0% | 801.33M |
Key risks
- Prolonged industrial and auto volume weakness with flat organic growth
- Raw material (petrochemical) cost spikes squeezing margins before price catches up
- Competitive pricing pressure from Sherwin-Williams, Axalta, and Asian coatings makers
Catalysts
- Higher-margin aerospace and refinish mix after portfolio divestitures
- Cyclical recovery in industrial volumes plus continued buybacks and cost programs
⚠ maintenance capex ≈ min(capex, D&A), capped at FCF · Price pays for ~6%/yr owner-earnings growth over 10y (reverse DCF); model credits 5%.