Lincoln Electric Holdings Inc (NASDAQ: LECO)

Sector: Industrials Industry: Tools & Accessories CIK: 0000059527
Market Cap 17.42 Bn
P/B 20.47
P/E 75.52
P/S 7.45
ROIC (Qtr) 19.86
Div Yield % 0.82
Rev 1y % (Qtr) 7.87
Total Debt (Qtr) 1.24 Bn
Debt/Equity (Qtr) 0.88

About

Price action

Investment thesis

Bull case

  • Strong operating cash flow of 662M provides robust 0.53x coverage of total debt 1.24B, indicating excellent debt servicing capability and financial flexibility.
  • Healthy cash reserves of 293M provide 3.32x coverage of short-term debt 88.20M, demonstrating strong liquidity position and minimal refinancing risk.
  • Robust free cash flow of 558.19M exceeds capital expenditure of 103.81M by 5.38x, indicating strong organic growth funding capability.
  • Operating cash flow of 662M provides exceptional 13.30x coverage of interest expenses 49.77M, showing strong debt service capability.
  • Operating cash flow of 662M provides strong 32.36x coverage of stock compensation 20.46M, indicating sustainable incentive practices.

Bear case

  • Operating cash flow of 662M barely covers its investment activities of (240.15M), with a coverage ratio of -2.76, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 662M provides thin coverage of dividend payments of (166.64M) with a -3.97 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 293M provide limited coverage of acquisition spending of (136.66M), which is -2.14x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • Free cash flow of 558.19M represents just -28.29x of debt issuance (19.73M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 4.25B provide limited buffer against comprehensive income items of (211.91M), which is -20.04x, indicating elevated exposure to market risks.

Segments Breakdown of Revenue (2024)

Geographical Breakdown of Revenue (2024)

Peer comparison

Companies in the Tools & Accessories
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 SNA Snap-on Inc 20.02 Bn 28.87 4.92 1.27 Bn
2 LECO Lincoln Electric Holdings Inc 17.42 Bn 75.52 7.45 1.24 Bn
3 RBC RBC Bearings INC 15.55 Bn 60.25 9.02 1.13 Bn
4 SWK Stanley Black & Decker, Inc. 13.98 Bn 21.92 1.48 6.61 Bn
5 TTC Toro Co 9.58 Bn 35.83 2.93 1.04 Bn
6 TKR Timken Co 6.56 Bn 22.05 1.44 2.21 Bn
7 KMT Kennametal Inc 2.74 Bn -65.21 1.36 0.64 Bn
8 HLMN Hillman Solutions Corp. 1.87 Bn 49.85 1.22 0.78 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 4.65 1.90
EV to Cash from Ops. EV/CFO 52.53 27.82
EV to Debt EV to Debt 14.31 8.16
EV to EBIT EV/EBIT 52.17 25.35
EV to EBITDA EV/EBITDA 45.43 17.92
EV to Free Cash Flow [EV/FCF] EV/FCF 62.03 44.85
EV to Market Cap EV to Market Cap 1.02 1.15
EV to Revenue EV/Rev 7.58 3.33
Price to Book Value [P/B] P/B 20.47 5.09
Price to Earnings [P/E] P/E 75.52 24.47
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 3.15 24.32
Dividend Payout Ratio % Div Payout % (Qtr) 31.90 34.31
Dividend per Basic Share Div per Share (Qtr) 3.00 1.81
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 29.66 31.22
Interest Coverage Int. cover (Qtr) 14.46 7.73
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -66.79 21.04
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -27.52 0.94
Dividend Growth (1y) % Div 1y % (Qtr) 5.63 -8.38
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 9.78 56.68
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 7.51 -4.93
EBIT Growth (1y) % EBIT 1y % (Qtr) 8.34 76.64
EBT Growth (1y) % EBT 1y % (Qtr) 7.32 235.45
EPS Growth (1y) % EPS 1y % (Qtr) 10.97 92.02
FCF Growth (1y) % FCF 1y % (Qtr) -0.78 -578.67
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 3.63 0.18
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 1.09 0.84
Cash Payout Ratio Cash Payout (Qtr) 0.22 0.18
Cash Ratio Cash Ratio (Qtr) 0.28 0.44
Current Ratio Curr Ratio (Qtr) 1.71 2.94
Debt to Equity Ratio Debt/Equity (Qtr) 0.88 0.52
Interest Cover Ratio Int Coverage (Qtr) 14.46 7.73
Times Interest Earned Times Interest Earned (Qtr) 14.46 7.73
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 19.50 14.51
EBIT Margin % EBIT Margin % (Qtr) 17.23 10.07
EBT Margin % EBT Margin % (Qtr) 16.04 8.24
Gross Margin % Gross Margin % (Qtr) 36.60 33.67
Net Profit Margin % Net Margin % (Qtr) 12.60 6.02