Xuanwei (NYSE: SHW) has been a big winner over the past decade, but like many of its peers, the company has been grappling with supply chain challenges. The coatings company plans to raise prices to combat inflation and expects to see improved results through the second half of 2022.

In this episode of "Beat and Raise," recorded Jan. 27, Fool.com contributors Jeremy Bowman and Brian Withers discuss the company's latest quarterly report and how supply chain issues are affecting it.

Brian Withers: I'm sharing your slides, so go ahead.

Jeremy Bowman: Yes, thank you. Sherwin-Williams, large coatings supplier, I'm sure you're familiar with them. One of the best in the industry indeed. A lot of companies in the base materials industry are struggling with supply chain issues. Nonetheless, fourth quarter revenue was up 6%, which I think is fairly stable in this environment, to $4.76 billion. While you can see the matching estimates, I think technically the estimate is $4.77 billion, which we call met. However, earnings per share fell 21% to an adjusted number of $1.34, so that's a pretty big miss. You'll see that margins are really impacted by unit growth and revenue growth. But at the end of the day, earnings are down.

There is also limited availability of companies related to the supply chain, but there is also a lot of cost inflation in those companies, so they are getting hit both ways. I think their outlook for 2022 is very good, especially if you consider this a mature company in a mature industry, although there are some pretty solid tailwinds in the home improvement industry. But so they're calling for about 10% revenue growth in 2022, which is slightly above the analyst consensus. To summarize, even stronger earnings growth, if you consider the current environment, I think 16% adjusted earnings growth is excellent, slightly below the current analyst average, which I think is $9.77, but I think you have to be comfortable with that guidance.

The company expects to have a fairly strong tailwind and see supply chain disruptions resolve themselves in the second half of the year, which is why you'll see strong earnings growth, as well as fairly respectable revenue growth. The bright spot – same-store sales. I don't know if 1% growth in the fourth quarter is a bright spot, but that's in their core North American market. They were up 6.1% for the year, which I think is very good. Again, the pandemic has been very good for home improvement, paint demand and all of those things, and the company noted that they're seeing strong end-user demand across all channels and in all markets. Really, it's just the supply side of things, especially the impact on margins and profits. And one more thing, Brian, if I asked you how many stores Xuanwei has in the U.S., what do you think?

Brian Withers: Oh, I don't know. Three thousand.

Jeremy Bowman: That's a good guess, they're actually close to 5,000, they've opened 79 stores there. That's correct. Trevor shared 4,774 of them, so they're open.

Brian Withers: approximately. [Laughs]

Jeremy Bowman: I think that's really where the competitive advantage comes from for them. I mean, Walmart has a similar number of stores to what they say they have within 10 miles of 90% of the U.S. population, so I think you can assume the same for Xuanwei, it's just interesting that we had some last summer when you interviewed painters and one of them said I use Xuanwei because there's one in every town. So access as a key point of strength in this industry, for them, you're not doing well in e-commerce, shipping, so it's great to have these stores.

Then the company noticed raw material, availability issues and cut sales by single digits in the fourth quarter, so the impact was pretty severe. They said mid-single digits for the whole year and I'm trying to close this out so we can reach out to Apple because I'm sure people will get a sense of this within a year, but obviously you're going to run into supply chain challenges weighing the edges. Like I said before, the company saw that pressure in the second half of the year, so that's good news. The guidance for the first quarter was just low to mid-single digit to mid-single digit revenue growth, so expect more pain this quarter and then valuation, I think those are good numbers, but I think for a mature industry and this stock is on a forward base with a P/E ratio of about 30 and a trailing number of about 35. I think it's a little bit, you could call it a stretch, during this crash that we've experienced , the stock has fallen about 20% in the last month, so you might get a better price.

Brian Withers: Yes, that makes sense. But they've been in this business for a long time and I've seen periods of inflation, certainly haven't seen a global pandemic, and I know in 2020 they're going to have to close a lot of stores and you don't really do that through e-commerce painting. You're not shipping paint through a shipping network. It's critical to open these stores and it's cool to see that they're continuing to expand stores even in the U.S. and Canada.

Jeremy Bowman: Yes, definitely a sign of strength.