Is Lincoln Electric Holdings (LECO) Still Attractive After A 46.7% One Year Rally?

Find out why Lincoln Electric Holdings's 46.7% return over the last year is lagging behind its peers.

A Discounted Cash Flow, or DCF, model takes projected future cash flows, discounts them back to today using a required return, and adds them up to estimate what a business might be worth now.

For Lincoln Electric Holdings, the latest twelve month Free Cash Flow is about $547.3 million. Analysts and model inputs point to projected Free Cash Flow of $953.0 million in 2030, with interim projections between 2026 and 2035 generated from a mix of analyst estimates and extrapolations by Simply Wall St’s 2 Stage Free Cash Flow to Equity model.

On this basis, the DCF model arrives at an intrinsic value of about $313.02 per share, compared with a current share price of $256.11. That implies an intrinsic discount of roughly 18.2%, which indicates that the shares are currently priced below this model’s estimate of value.

Our Discounted Cash Flow (DCF) analysis suggests Lincoln Electric Holdings is undervalued by 18.2%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Lincoln Electric Holdings.

For profitable companies, the P/E ratio is a straightforward way to connect what you pay for each share with the earnings that support that price. It helps you see how much investors are willing to pay today for each dollar of current earnings.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risks. Higher expected growth or lower perceived risk can justify a higher P/E, while slower expected growth or higher risk usually aligns with a lower one.

Lincoln Electric Holdings currently trades on a P/E of 26.97x. This sits close to the Machinery industry average P/E of 28.14x and the peer group average of 27.71x. Simply Wall St’s proprietary Fair Ratio for Lincoln Electric Holdings is 23.33x, which reflects factors such as its earnings growth profile, profit margins, industry, market cap and company specific risks.

The Fair Ratio is more tailored than a simple comparison to peers or the industry, because it adjusts for the company’s own fundamentals rather than assuming all Machinery stocks deserve similar multiples. Comparing 26.97x to the Fair Ratio of 23.33x suggests the shares trade above this customised benchmark.

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Earlier it was mentioned that there is an even better way to understand valuation. Narratives bring that idea to life by letting you attach a clear story about Lincoln Electric Holdings to the numbers you see, link that story to a forecast for revenue, earnings and margins, and then to a Fair Value that you can compare against today’s share price. All of this is hosted on Simply Wall St’s Community page, where Narratives refresh as new news or earnings arrive. You might, for example, lean toward a higher Fair Value closer to US$340 if you think automation demand, margins and capital returns will support stronger earnings, or toward a lower Fair Value nearer US$189 if you are more cautious about traditional welding exposure, regulation and cyclicality. You can then use the gap between Fair Value and the current price to help decide whether the stock looks attractive, fully priced or expensive to you.

For Lincoln Electric Holdings, we will make it really easy for you with previews of two leading Lincoln Electric Holdings narratives:

Start with the bullish case if you think the current price still leaves room for upside based on pricing power, automation and an industrial recovery, then set it against a more cautious view that questions how much future earnings strength is already reflected in the share price.

🐂 Lincoln Electric Holdings Bull Case

Fair value in this bullish narrative is set at US$308.30 per share.

At the last close of US$256.11, that implies the shares trade about 16.9% below this Fair Value estimate.

The narrative uses an annual revenue growth rate assumption of 5.62%.

🐻 Lincoln Electric Holdings Bear Case

Fair value in this more cautious narrative is set at US$226.74 per share.

At the last close of US$256.11, that implies the shares trade about 12.9% above this Fair Value estimate.

The narrative uses an annual revenue growth rate assumption of 3.73%.

Do you think there's more to the story for Lincoln Electric Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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Through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products in the United States and internationally.

Solid track record with excellent balance sheet and pays a dividend.