Why did the stock price plunge despite rising profits for a listed company?

I. Stock prices reflect market expectations. 1. Stock prices anticipate profits—whether at market bottoms or market tops. Stock price reactions to profits are not linearly lagged; rather, the market 'prices in' future earnings months—or even longer—in advance. When industry sales begin to rise, or when prices stop falling and stabilize, the market adjusts its earnings expectations for the company—and this adjustment is reflected in the stock price—not only after the delayed release of financial reports. "Buy losses at market bottoms; sell growth at market tops." During the COVID-19 pandemic in 2020, U.S. airline stocks hit bottom while quarterly losses ballooned to several billion dollars—because the market anticipated an eventual recovery from the pandemic; conversely, the Philadelphia Semiconductor Index peaked and began declining three months ahead of the semiconductor industry’s peak profit growth in 2021. 2. The destructive power of "missing expectations" Market pricing is fundamentally a game of the gap between expectations and reality. Excessively high prior expectations will trigger stock price corrections when unmet—and drive rallies when exceeded. II. What exactly matters in profit analysis: absolute value? Growth rate? Or changes in growth rate? (A) Absolute value Stable absolute profitability forms the foundational support for stock prices—but absolute growth alone does not necessarily drive share price appreciation. (B) Growth rate: the valuation engine for growth stocks High growth rates constitute the core rationale behind valuation premiums for growth stocks; however, the sustainability of that growth determines the duration of the premium. From 2020 to 2022, revenue growth rates for new-energy vehicle (NEV) manufacturers commonly exceeded 50%, propelling valuations for companies like CATL and BYD to P/E ratios surpassing 100x; yet when one NEV startup’s growth rate dropped to 30% in 2023, its stock price halved within six months. Beware of valuation traps: high-valuation growth stocks often face valuation compression once growth slows below 30%–25%.

Afraid of AI-related stocks trading at elevated levels? It’s time to look at Sherwin-Williams (Ticker: SHW)—the 'Apple' of the paint industry in U.S. equities.

Among the Nasdaq-100 index constituents, Sherwin-Williams Company (Ticker: SHW), one of the world’s largest paint manufacturers, boasts exceptional market dominance. A global paint industry leader alongside PPG Industries—often dubbed the 'twin stars' of the sector—Sherwin-Williams derives over 90% of its total revenue from architectural and industrial coatings. The subtle matte or metallic finishes on certain smartphone casings, as well as Valspar automotive touch-up paints, all originate from Sherwin-Williams’ industrial coating solutions. Sherwin-Williams employs a business model combining company-owned retail stores with full supply-chain integration. In the U.S. alone, it operates more than 4,900 proprietary stores—creating formidable industry barriers. This model resembles Apple’s retail strategy: enabling direct access to real-time market demand while locking in high margins through brand premium. The company consistently maintains gross margins between 45% and 49%, significantly exceeding the paint industry’s average range of 30%–40%. Its competitive moat stems primarily from decades of brand-building and a comprehensive, responsive in-house logistics network—capable of delivering to construction sites within two hours. Founded 150 years ago, this enduring enterprise went public in 1964 and is renowned on U.S. exchanges as a 'Dividend Aristocrat.'

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