LINCOLN ELECTRIC HOLDINGS (LECO) Stock Fundamental Analysis
NASDAQ:LECO - Nasdaq - US5339001068 - Common Stock - Currency: USD
We assign a fundamental rating of 6 out of 10 to LECO. LECO was compared to 127 industry peers in the Machinery industry. LECO scores excellent points on both the profitability and health parts. This is a solid base for a good stock. LECO is quite expensive at the moment. It does show a decent growth rate.
1. Profitability
1.1 Basic Checks
LECO had positive earnings in the past year.
LECO had a positive operating cash flow in the past year.
In the past 5 years LECO has always been profitable.
Each year in the past 5 years LECO had a positive operating cash flow.
1.2 Ratios
LECO's Return On Assets of 12.72% is amongst the best of the industry. LECO outperforms 88.98% of its industry peers.
The Return On Equity of LECO (34.41%) is better than 95.28% of its industry peers.
LECO has a better Return On Invested Capital (20.27%) than 96.06% of its industry peers.
LECO had an Average Return On Invested Capital over the past 3 years of 21.22%. This is significantly above the industry average of 10.84%.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 12.72% | ||
| ROE | 34.41% | ||
| ROIC | 20.27% |
ROA(3y)14.74%
ROA(5y)12.76%
ROE(3y)40.81%
ROE(5y)36.11%
ROIC(3y)21.22%
ROIC(5y)19.81%
1.3 Margins
With an excellent Profit Margin value of 11.44%, LECO belongs to the best of the industry, outperforming 80.31% of the companies in the same industry.
In the last couple of years the Profit Margin of LECO has grown nicely.
The Operating Margin of LECO (16.98%) is better than 78.74% of its industry peers.
LECO's Operating Margin has improved in the last couple of years.
LECO has a Gross Margin of 36.58%. This is in the better half of the industry: LECO outperforms 66.14% of its industry peers.
In the last couple of years the Gross Margin of LECO has grown nicely.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| OM | 16.98% | ||
| PM (TTM) | 11.44% | ||
| GM | 36.58% |
OM growth 3Y4.56%
OM growth 5Y5.34%
PM growth 3Y10.79%
PM growth 5Y3.57%
GM growth 3Y3.53%
GM growth 5Y1.97%
2. Health
2.1 Basic Checks
With a Return on Invested Capital (ROIC) well above the Cost of Capital (WACC), LECO is creating value.
The number of shares outstanding for LECO has been reduced compared to 1 year ago.
Compared to 5 years ago, LECO has less shares outstanding
Compared to 1 year ago, LECO has a worse debt to assets ratio.
2.2 Solvency
An Altman-Z score of 7.13 indicates that LECO is not in any danger for bankruptcy at the moment.
LECO has a better Altman-Z score (7.13) than 88.98% of its industry peers.
LECO has a debt to FCF ratio of 2.36. This is a good value and a sign of high solvency as LECO would need 2.36 years to pay back of all of its debts.
LECO has a better Debt to FCF ratio (2.36) than 72.44% of its industry peers.
A Debt/Equity ratio of 0.87 indicates that LECO is somewhat dependend on debt financing.
The Debt to Equity ratio of LECO (0.87) is worse than 74.80% of its industry peers.
Although LECO does not score too well on debt/equity it has very limited outstanding debt, which is well covered by the FCF. We will not put too much weight on the debt/equity number as it may be because of low equity, which could be a consequence of a share buyback program for instance. This needs to be investigated.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.87 | ||
| Debt/FCF | 2.36 | ||
| Altman-Z | 7.13 |
ROIC/WACC2.1
WACC9.65%
2.3 Liquidity
A Current Ratio of 1.78 indicates that LECO should not have too much problems paying its short term obligations.
With a Current ratio value of 1.78, LECO is not doing good in the industry: 61.42% of the companies in the same industry are doing better.
LECO has a Quick Ratio of 1.19. This is a normal value and indicates that LECO is financially healthy and should not expect problems in meeting its short term obligations.
LECO's Quick ratio of 1.19 is in line compared to the rest of the industry. LECO outperforms 45.67% of its industry peers.
The current and quick ratio evaluation for LECO is rather negative, while it does have excellent solvency and profitability. These ratios do not necessarly indicate liquidity issues and need to be evaluated against the specifics of the business.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Current Ratio | 1.78 | ||
| Quick Ratio | 1.19 |
3. Growth
3.1 Past
LECO shows a small growth in Earnings Per Share. In the last year, the EPS has grown by 0.53%.
Measured over the past years, LECO shows a quite strong growth in Earnings Per Share. The EPS has been growing by 14.62% on average per year.
LECO shows a decrease in Revenue. In the last year, the revenue decreased by -4.37%.
LECO shows a small growth in Revenue. Measured over the last years, the Revenue has been growing by 5.94% yearly.
EPS 1Y (TTM)0.53%
EPS 3Y14.33%
EPS 5Y14.62%
EPS Q2Q%11.11%
Revenue 1Y (TTM)-4.37%
Revenue growth 3Y7.42%
Revenue growth 5Y5.94%
Sales Q2Q%6.56%
3.2 Future
The Earnings Per Share is expected to grow by 10.22% on average over the next years. This is quite good.
Based on estimates for the next years, LECO will show a small growth in Revenue. The Revenue will grow by 5.51% on average per year.
EPS Next Y-0.33%
EPS Next 2Y4.75%
EPS Next 3Y5.56%
EPS Next 5Y10.22%
Revenue Next Year2.68%
Revenue Next 2Y3.55%
Revenue Next 3Y3.65%
Revenue Next 5Y5.51%
3.3 Evolution
Although the future EPS growth is still strong, it is not able to hold up the even more excellent growth rate of the past years.
When comparing the Revenue growth rate of the last years to the growth rate of the upcoming years, we see that the growth is stable.
4. Valuation
4.1 Price/Earnings Ratio
A Price/Earnings ratio of 25.71 indicates a quite expensive valuation of LECO.
LECO's Price/Earnings is on the same level as the industry average.
Compared to an average S&P500 Price/Earnings ratio of 27.25, LECO is valued at the same level.
LECO is valuated rather expensively with a Price/Forward Earnings ratio of 23.91.
The rest of the industry has a similar Price/Forward Earnings ratio as LECO.
Compared to an average S&P500 Price/Forward Earnings ratio of 36.80, LECO is valued a bit cheaper.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 25.71 | ||
| Fwd PE | 23.91 |
4.2 Price Multiples
Compared to the rest of the industry, the Enterprise Value to EBITDA ratio of LECO indicates a slightly more expensive valuation: LECO is more expensive than 60.63% of the companies listed in the same industry.
The rest of the industry has a similar Price/Free Cash Flow ratio as LECO.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| P/FCF | 25.45 | ||
| EV/EBITDA | 18.65 |
4.3 Compensation for Growth
LECO has an outstanding profitability rating, which may justify a higher PE ratio.
PEG (NY)N/A
PEG (5Y)1.76
EPS Next 2Y4.75%
EPS Next 3Y5.56%
5. Dividend
5.1 Amount
With a Yearly Dividend Yield of 1.34%, LECO has a reasonable but not impressive dividend return.
Compared to an average industry Dividend Yield of 1.86, LECO pays a bit more dividend than its industry peers.
Compared to an average S&P500 Dividend Yield of 2.34, LECO's dividend is way lower than the S&P500 average.
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.34% |
5.2 History
The dividend of LECO is nicely growing with an annual growth rate of 8.56%!
LECO has been paying a dividend for at least 10 years, so it has a reliable track record.
LECO has not decreased its dividend for at least 10 years, so it has a reliable track record of non decreasing dividend.
Dividend Growth(5Y)8.56%
Div Incr Years24
Div Non Decr Years24
5.3 Sustainability
35.53% of the earnings are spent on dividend by LECO. This is a low number and sustainable payout ratio.
The dividend of LECO is growing around the same rate as the earnings are growing. If this keeps up the dividend growth is sustainable.
DP35.53%
EPS Next 2Y4.75%
EPS Next 3Y5.56%
243.5
+20.17 (+9.03%)
Chartmill FA Rating
GICS SectorIndustrials
GICS IndustryGroupCapital Goods
GICS IndustryMachinery
Earnings (Last)
Earnings (Next)
Inst Owners80.56%
Inst Owner Change-0.43%
Ins Owners1.47%
Ins Owner Change1.41%
Market Cap13.59B
Analysts77.5
Price Target220.46 (-9.46%)
Short Float %1.68%
Short Ratio2.46
Dividend
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Dividend Yield | 1.34% |
Yearly Dividend2.87
Dividend Growth(5Y)8.56%
DP35.53%
Div Incr Years24
Div Non Decr Years24
Ex-Date
Surprises & Revisions
EPS beat(2)1
Avg EPS beat(2)10.33%
Min EPS beat(2)-5.1%
Max EPS beat(2)25.75%
EPS beat(4)3
Avg EPS beat(4)5.44%
Min EPS beat(4)-5.1%
Max EPS beat(4)25.75%
EPS beat(8)7
Avg EPS beat(8)5.11%
EPS beat(12)10
Avg EPS beat(12)4.4%
EPS beat(16)14
Avg EPS beat(16)5.5%
Revenue beat(2)2
Avg Revenue beat(2)0.56%
Min Revenue beat(2)0.3%
Max Revenue beat(2)0.82%
Revenue beat(4)2
Avg Revenue beat(4)-0.81%
Min Revenue beat(4)-2.69%
Max Revenue beat(4)0.82%
Revenue beat(8)3
Avg Revenue beat(8)-2.27%
Revenue beat(12)5
Avg Revenue beat(12)-1.56%
Revenue beat(16)8
Avg Revenue beat(16)-0.8%
PT rev (1m)1.89%
PT rev (3m)-5.2%
EPS NQ rev (1m)0.21%
EPS NQ rev (3m)-1.87%
EPS NY rev (1m)0.78%
EPS NY rev (3m)-2.04%
Revenue NQ rev (1m)0.47%
Revenue NQ rev (3m)2.41%
Revenue NY rev (1m)0.46%
Revenue NY rev (3m)1.58%
Valuation
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| PE | 25.71 | ||
| Fwd PE | 23.91 | ||
| P/S | 3.37 | ||
| P/FCF | 25.45 | ||
| P/OCF | 20.87 | ||
| P/B | 10.14 | ||
| P/tB | 25.82 | ||
| EV/EBITDA | 18.65 |
EPS(TTM)9.47
EY3.89%
EPS(NY)10.18
Fwd EY4.18%
FCF(TTM)9.57
FCFY3.93%
OCF(TTM)11.67
OCFY4.79%
SpS72.22
BVpS24
TBVpS9.43
PEG (NY)N/A
PEG (5Y)1.76
Profitability
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| ROA | 12.72% | ||
| ROE | 34.41% | ||
| ROCE | 25.78% | ||
| ROIC | 20.27% | ||
| ROICexc | 23.8% | ||
| ROICexgc | 37.09% | ||
| OM | 16.98% | ||
| PM (TTM) | 11.44% | ||
| GM | 36.58% | ||
| FCFM | 13.25% |
ROA(3y)14.74%
ROA(5y)12.76%
ROE(3y)40.81%
ROE(5y)36.11%
ROIC(3y)21.22%
ROIC(5y)19.81%
ROICexc(3y)24.29%
ROICexc(5y)22.63%
ROICexgc(3y)41.43%
ROICexgc(5y)36.86%
ROCE(3y)27.25%
ROCE(5y)25.47%
ROICexcg growth 3Y8.18%
ROICexcg growth 5Y9.37%
ROICexc growth 3Y1.83%
ROICexc growth 5Y4.58%
OM growth 3Y4.56%
OM growth 5Y5.34%
PM growth 3Y10.79%
PM growth 5Y3.57%
GM growth 3Y3.53%
GM growth 5Y1.97%
F-Score6
Asset Turnover1.11
Health
| Industry Rank | Sector Rank | ||
|---|---|---|---|
| Debt/Equity | 0.87 | ||
| Debt/FCF | 2.36 | ||
| Debt/EBITDA | 1.5 | ||
| Cap/Depr | 129.7% | ||
| Cap/Sales | 2.91% | ||
| Interest Coverage | 250 | ||
| Cash Conversion | 84.05% | ||
| Profit Quality | 115.81% | ||
| Current Ratio | 1.78 | ||
| Quick Ratio | 1.19 | ||
| Altman-Z | 7.13 |
F-Score6
WACC9.65%
ROIC/WACC2.1
Cap/Depr(3y)109.73%
Cap/Depr(5y)95.96%
Cap/Sales(3y)2.33%
Cap/Sales(5y)2.23%
Profit Quality(3y)91.73%
Profit Quality(5y)105.28%
High Growth Momentum
Growth
EPS 1Y (TTM)0.53%
EPS 3Y14.33%
EPS 5Y14.62%
EPS Q2Q%11.11%
EPS Next Y-0.33%
EPS Next 2Y4.75%
EPS Next 3Y5.56%
EPS Next 5Y10.22%
Revenue 1Y (TTM)-4.37%
Revenue growth 3Y7.42%
Revenue growth 5Y5.94%
Sales Q2Q%6.56%
Revenue Next Year2.68%
Revenue Next 2Y3.55%
Revenue Next 3Y3.65%
Revenue Next 5Y5.51%
EBIT growth 1Y-5.84%
EBIT growth 3Y12.31%
EBIT growth 5Y11.6%
EBIT Next Year16.2%
EBIT Next 3Y9.48%
EBIT Next 5Y10.45%
FCF growth 1Y36.18%
FCF growth 3Y16.82%
FCF growth 5Y7.65%
OCF growth 1Y40.32%
OCF growth 3Y17.94%
OCF growth 5Y8.24%