Financial Analysis: Lincoln Electric (LECO) versus The Competition

Lincoln Electric (NASDAQ:LECO) is one of 434 publicly-traded companies in the “Machinery” industry, but how does it contrast to its competitors? We will compare Lincoln Electric to similar businesses based on the strength of its analyst recommendations, risk, valuation, profitability, institutional ownership, dividends and earnings.

Insider and Institutional Ownership

79.6% of Lincoln Electric shares are owned by institutional investors. Comparatively, 52.2% of shares of all “Machinery” companies are owned by institutional investors. 1.7% of Lincoln Electric shares are owned by company insiders. Comparatively, 14.1% of shares of all “Machinery” companies are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Lincoln Electric has a beta of 1.2, meaning that its stock price is 20% more volatile than the S&P 500. Comparatively, Lincoln Electric’s competitors have a beta of 4.52, meaning that their average stock price is 352% more volatile than the S&P 500.

Dividends

Lincoln Electric pays an annual dividend of $3.16 per share and has a dividend yield of 1.2%. Lincoln Electric pays out 31.6% of its earnings in the form of a dividend. As a group, “Machinery” companies pay a dividend yield of 2.5% and pay out 27.3% of their earnings in the form of a dividend. Lincoln Electric has increased its dividend for 30 consecutive years. Lincoln Electric lags its competitors as a dividend stock, given its lower dividend yield and higher payout ratio.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Lincoln Electric and its competitors, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lincoln Electric	0	4	5	1	2.70
Lincoln Electric Competitors	4079	14474	17888	777	2.41

Lincoln Electric currently has a consensus price target of $307.22, indicating a potential upside of 14.35%. As a group, “Machinery” companies have a potential upside of 33.23%. Given Lincoln Electric’s competitors higher probable upside, analysts plainly believe Lincoln Electric has less favorable growth aspects than its competitors.

Valuation and Earnings

This table compares Lincoln Electric and its competitors top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Lincoln Electric	$4.23 billion	$520.53 million	26.84
Lincoln Electric Competitors	$4.48 billion	$348.34 million	-14.61

Lincoln Electric’s competitors have higher revenue, but lower earnings than Lincoln Electric. Lincoln Electric is trading at a higher price-to-earnings ratio than its competitors, indicating that it is currently more expensive than other companies in its industry.

Profitability

This table compares Lincoln Electric and its competitors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lincoln Electric	12.35%	39.23%	15.25%
Lincoln Electric Competitors	-1,946.96%	-10.16%	0.86%

Summary

Lincoln Electric beats its competitors on 9 of the 15 factors compared.

About Lincoln Electric

Lincoln Electric Holdings, Inc., through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products worldwide. The company operates through three segments: Americas Welding, International Welding, and The Harris Products Group. It offers brazing and soldering filler metals, arc welding equipment, plasma and oxyfuel cutting systems, wire feeding systems, fume control equipment, welding accessories, and specialty gas regulators, and education solutions, as well as a portfolio of automated solutions for joining, cutting, material handling, module assembly, and end of line testing, as well as involved in brazing and soldering alloys, and in the retail business in the United States. In addition, the company manufactures copper and aluminum headers, distributor assemblies, and manifolds for the heating, ventilation, and air conditioning sector in the United States and Mexico; provides specialty welding consumables, wear plates and maintenance and repair services for alloy and wear-resistant products used in mining, steel, agricultural, and industrial mill applications; and designs and manufactures robotic assembly and arc welding systems that automate the tacking and welding of steel beams. Further, the company serves general fabrication, oil and gas, power generation, process, automotive and transportation, and construction and infrastructure industries, as well as heavy fabrication, ship building, and maintenance and repair markets. It sells its products directly to users of welding products, as well as through industrial distributors, retailers, and agents. The company was founded in 1895 and is headquartered in Cleveland, Ohio.