The Valuation Gap Wall Street Has Not Closed Yet

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Defense stocks are surging. Kratos gained 196% in 2025. AeroVironment hit $16 billion. Northrop broke out to all-time highs.

But here is what most investors missed.

The Pentagon just announced plans to spend $1 billion to purchase more than 340,000 drones by 2027. Defense Secretary Hegseth ordered every Army squad to carry unmanned systems by the end of 2026.

That is not a wish list. It is a mandate.

And the company positioned to fill that demand is not a defense giant.

ZenaTech Inc. (NASDAQ:ZENA)is already shipping drones for paid pilots, generating revenue, and scaling a national Drone-as-a-Service network while competitors debate timelines.

Q3 2025 revenue hit $4.35 million, up 1,225% year-over-year. Twenty acquisitions are complete. Paid trials with the US Air Force and Navy are done. Green UAS certification is in progress.

The company is also developing Eagle Eye, a quantum-powered intelligence platform designed for US Defense and Homeland Security.

Market cap: roughly $142 million.

Red Cat trades at $2 billion. AeroVironment trades at $15.4 billion. Kratos trades at $19 billion.

Maxim Group analyst Matthew Galinko has a BUY rating with a $7 price target. That is nearly 40% upside from current levels.

That gap does not usually last once the market connects the dots.

See the full ZenaTech (NASDAQ:ZENA)story and why this drone play is gaining attention now.

Special Report

Sherwin-Williams: The Boring Beauty Play on Housing Recovery

Written by Chris Markoch. Published: 5/1/2026. 

Sherwin-Williams logo displayed on a light blue wall alongside paint brushes and a roller tray.

Key Points

  • Sherwin-Williams beat Q1 earnings expectations but issued cautious guidance due to a weak housing market.
  • Elevated valuation and soft near-term demand could limit upside despite strong fundamentals.
  • SHW remains a long-term compounder, especially if lower mortgage rates revive housing activity.
  • Special Report: The $1.75T “Backdoor” ticker (NOT Starlink) (From Behind the Markets)

Sherwin-Williams (NYSE: SHW) fell about 3.5% after the company released its Q1 2026 earnings report. At a time when investors are looking beyond headline numbers, the company’s guidance was essentially flat.

Specifically, Sherwin-Williams cited elevated mortgage rates, which are contributing to a stagnant housing sector, as a reason to expect softer do-it-yourself (DIY) consumer demand. The softness isn’t limited to new construction — the company said current homeowners are curtailing spending on remodeling projects. Perhaps more unsettling, Sherwin-Williams doesn’t see signs of a near-term reversal.

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Adding to investor concerns are geopolitical tensions in the Middle East, which have pushed up producer costs for raw materials, energy inputs, and transportation. The company plans targeted price increases to help offset those pressures, but it’s unclear how effective that will be amid waning demand.

Solid Earnings Show Resilience in a Weak Housing Market

The April 28 report was solid. Sherwin-Williams beat on both the top and bottom lines, reporting adjusted earnings per share (EPS) of $2.35 versus expectations of $2.28, up 4% year-over-year. The company also reiterated full-year 2026 guidance with a midpoint forecast of $11.70. For full-year 2025, Sherwin-Williams posted adjusted EPS of $11.45.

Revenue of $5.67 billion topped forecasts of $5.56 billion and improved 6.7% from $5.31 billion in Q1 2025. The company guided to low- to mid-single-digit revenue growth for the full year.

That’s not a bad report; it shows Sherwin-Williams is leaning on channel relationships and its leading brands to navigate the current business cycle.

Valuation Concerns May Limit Near-Term Upside

Valuation remains a key issue. Analysts were trimming price targets heading into the report, and the consensus price target of $375.33 as of April 30 sits more than 15% below the stock price. Investors also must weigh the company’s price-to-earnings (P/E) ratio of roughly 31x, a premium to the S&P 500 at about 27x and the Specialty Chemicals sector at around 23x.

That said, Sherwin-Williams has a healthy balance sheet. Operating cash flow of $139.1 million was a significant year-over-year improvement from the -$61.1 million reported in Q1 2025. That supports the view that SHW has the financial discipline to compound value through a down cycle.

Dividend Growth and Long-Term Compounding Remain Key

Before the earnings release, Sherwin-Williams announced a quarterly dividend of $0.80 per share, payable June 8 to shareholders of record on May 22. The company is a Dividend Aristocrat, having increased its dividend for 48 consecutive years — two years shy of Dividend King status.

That long-term dividend and compounding capability is where investors should focus. Prior to the post-earnings dip, SHW delivered a five-year total return of just over 30%, a reflection of housing-market softness. Over 10 years and longer, returns underscore the company’s role as a compounder of growth and value in a portfolio.

The challenges facing Sherwin-Williams are material and could test its current valuation. The company’s best option is to control the controllables — delivering slow, steady growth. That growth could accelerate if mortgage rates fall, which is possible if the Federal Reserve cuts the federal funds rate in 2026.

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Published by RJ Hamster

I was born on 6 August 1956 in San Francisco, California to Janet and (the late) Richard Hovis. I grew up in Santa Monica, California where I attended elementary, junior high school, and high school (graduating in 1974), in addition to involvement in sports and recreation (Little League +, the Boy’s Club ++). Further, it was in elementary school – St. Augustine’s By-the -Sea Parish School that I found, and made the choice to truly journey with God. I attended Arizona State University from 1974 to 1977 – seeking to become an architect, however, I was not accepted, and, as such, I graduated with a Liberal Arts degree. Upon graduation from Arizona State University, I attended Cal Poly San Luis Obispo and studied City and Regional Planning at the Master’s level. I successfully completed one (1) year in a two (2) year program – I did not complete the Master’s degree in City and Regional Planning – due to personal reasons. I returned to Santa Monica where I started (October 1979) my career as graphic designer with Exxon Company, USA. I spent five years with Exxon Company, USA. While working with Exxon Company, USA I was accepted into architectural school – Sci-Arc in Southern California, however, I did not attend preferring to stay with Exxon.. In 1982 I married Laura Flosi and in April 1983 we had our one and only child – Lauren Alain Hovis – a gift from God. We moved to Phoenix, Arizona in 1984 from Los Angeles, where I went to work as a graphic designer with Kitchell CEM (from 1985 -1987). From 1987 – 1995 I was an independent contractor, and a registered representative in mortgage finance, financial management, graphic design, and drafting. Further, I attended the University of Phoenix and successfully obtained a Master’s in Business Administration (MBA) in 1982. I was also a member of the Scottsdale Jaycees, where I became very involved in community events and projects. In 1994, I accepted a cartography position with the Defense Mapping Agency in Reston, Virginia. As such, I relocated from Phoenix to Reston. In 1998, I was accepted and worked as a Visual Information Officer with the Central Intelligence Agency. In 2002, I worked as a Support Officer until my retirement (due to a need for shoulder surgery) in September 2018. Away from my Federal Government service, I have been involved in various organizations and activities in Northern Virginia. In November of 2011, I married Rebecca Ouellette in Santa Monica, California. I reside in San Tan Valley, AZ with my two hamster - Jess and Timothy, our fish, our lizard - RJ Lizard., and our cats - Pearl and Grey. As to hobbies, I enjoy playing sports, attending sporting events, mentoring individuals from financial management to hamsters, building models, photography, travel, multimedia design, managing partner for RJ Hamster, and jazz – smooth jazz to a samba or a bossa nova. Love and God Bless, Peter – aka RJ Hamster Jo hi

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