Lincoln Electric Holdings Stock Shows Every Sign Of Being Significantly Overvalued
In This Article:
- By GF Value
The stock of Lincoln Electric Holdings (NAS:LECO, 30-year Financials) gives every indication of being significantly overvalued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $122.56 per share and the market cap of $7.3 billion, Lincoln Electric Holdings stock is believed to be significantly overvalued. GF Value for Lincoln Electric Holdings is shown in the chart below.
Because Lincoln Electric Holdings is significantly overvalued, the long-term return of its stock is likely to be much lower than its future business growth, which averaged 3.8% over the past three years and is estimated to grow 0.92% annually over the next three to five years.
Link: These companies may deliever higher future returns at reduced risk.
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Lincoln Electric Holdings has a cash-to-debt ratio of 0.36, which which ranks worse than 74% of the companies in Industrial Products industry. The overall financial strength of Lincoln Electric Holdings is 6 out of 10, which indicates that the financial strength of Lincoln Electric Holdings is fair. This is the debt and cash of Lincoln Electric Holdings over the past years:
It poses less risk to invest in profitable companies, especially those that have demonstrated consistent profitability over the long term. A company with high profit margins is also typically a safer investment than one with low profit margins. Lincoln Electric Holdings has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $2.7 billion and earnings of $3.41 a share. Its operating margin is 12.33%, which ranks better than 77% of the companies in Industrial Products industry. Overall, GuruFocus ranks the profitability of Lincoln Electric Holdings at 8 out of 10, which indicates strong profitability. This is the revenue and net income of Lincoln Electric Holdings over the past years: