Linde PLC (LIN, Financial) experienced a 1.07% loss on September 20, 2023, and a 5.02% gain over the last three months. Its Earnings Per Share (EPS) stands at 11.46. The question that arises is: is the stock fairly valued? This article aims to answer this question by providing a comprehensive valuation analysis of Linde PLC. We encourage our readers to delve into this analysis for a better understanding of the company's value.
Introduction to Linde PLC
Linde PLC is the world's largest industrial gas supplier, operating in over 100 countries. The company's main products include atmospheric gases like oxygen, nitrogen, and argon, and process gases like hydrogen, carbon dioxide, and helium. Linde also manufactures equipment used in industrial gas production. The company serves a wide range of markets, including chemicals, manufacturing, healthcare, and steelmaking. In 2022, Linde generated approximately $33 billion in revenue and $5.4 billion in GAAP operating profit.
Linde PLC's stock price stands at $385.6, while its GF Value, an estimation of its fair value, is $352.21. This comparison sets the stage for a deeper exploration of the company's value.
Understanding the GF Value of Linde PLC
The GF Value is a proprietary measure that estimates the intrinsic value of a stock. This measure considers historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line, visible on our summary page, represents the fair value at which the stock should ideally trade.
According to the GF Value method, Linde PLC appears to be fairly valued. This valuation is based on historical multiples, an internal adjustment factor derived from the company's past growth, and analyst estimates of future business performance. A significant deviation from the GF Value Line, either above or below, indicates overvaluation or undervaluation, respectively, and can predict future returns. Considering Linde PLC's current price of $385.6 per share, the stock seems fairly valued.
Given that Linde PLC is fairly valued, the long-term return of its stock is likely to align with the rate of its business growth.
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Financial Strength of Linde PLC
Before investing in a company, it's crucial to assess its financial strength. Companies with weak financial strength pose a higher risk of permanent loss. By considering the cash-to-debt ratio and interest coverage, one can gauge a company's financial strength. Linde PLC has a cash-to-debt ratio of 0.19, which is lower than 80.21% of 1501 companies in the Chemicals industry. The overall financial strength of Linde PLC is 7 out of 10, indicating fair financial strength.
Profitability and Growth of Linde PLC
Companies that have consistently been profitable over the long term offer less risk to investors. Higher profit margins usually indicate a better investment compared to a company with lower profit margins. Linde PLC has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $33.10 billion and Earnings Per Share (EPS) of $11.46. Its operating margin is 22.34%, which ranks better than 91.84% of 1507 companies in the Chemicals industry. Overall, the profitability of Linde PLC is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. GuruFocus research has found that growth is closely correlated with the long-term stock performance of a company. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Linde PLC is 8.5%, which ranks worse than 53.35% of 1447 companies in the Chemicals industry. The 3-year average EBITDA growth rate is 11.1%, which ranks better than 52.62% of 1338 companies in the Chemicals industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate its profitability. Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC exceeds the WACC, the company is likely creating value for its shareholders. During the past 12 months, Linde PLC's ROIC was 7.31 while its WACC came in at 9.9.
Conclusion
Overall, Linde PLC (LIN, Financial) stock appears to be fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 52.62% of 1338 companies in the Chemicals industry. To learn more about Linde PLC stock, you can check out its 30-Year Financials here.
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