LINCOLN ELECTRIC HOLDINGS INC (LECO): what the price requires
At today's price, LINCOLN ELECTRIC HOLDINGS INC (LECO) is priced for +18.8% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/LECO
Headline
| Field | Value |
|---|---|
| Ticker | LECO |
| Company | LINCOLN ELECTRIC HOLDINGS INC |
| Current price | $250.74/sh |
| Composition | Consumables 54% / Equipment 26% / Automation 21% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 13.1% |
| Operating margin today | 16.8% |
| Margin compression implied | -3.7pp |
| Implied growth | 18.8% |
| Multiple paid | 21x operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
Solve inputs: computed at a 9.5% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~7pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.13σ |
| cohort percentile (of 225 peers) | 45 |
| sustained it ~5 years at this level | 39% |
| implied end-window share | 0% |
Valuation X-Ray
Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 2.38x | 5 | expensive |
| Earnings | 2.71x | 5 | expensive |
| Relative | 1.28x | 5 | expensive |
| Growth | 1.20x | 3 | expensive |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.5%); the inversion above states its own rate.
Per-Model Detail (n=18)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $185.77 | 1.35x | yes | FCF base $0.5B, growth 8% (input: historical growth), terminal g 4.0%, WACC 8.5%, 6yr projection |
| DCF Exit Multiple | Growth | $252.15 | 0.99x | yes | Exit EV/EBITDA: 15.8x / 17.8x / 19.8x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | $175.99 | 1.42x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 15.0x / 18.0x / 21.0x (bear / base = reference held flat / bull), EV/EBITDA 12x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $105.23 | 2.38x | yes | BV/sh $27.32, ROE (TTM) 35.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $221.59 | 1.13x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $208.47 | 1.20x | yes | Rev $4.4B, growth 8% (input: historical growth; tapered), Terminal P/S: 2.7x / 3.2x / 3.7x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $209.06 | 1.20x | yes | EPS $9.69, growth 22% (input: historical EPS growth), PEG=1.19 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $92.65 | 2.71x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.67B × (1−21%) / WACC 8.5% → EPV (no growth) |
| Residual Income | Asset | $164.34 | 1.53x | yes | BV $27.32 + 5yr PV of (ROE (TTM) 35.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $77.18 | 3.25x | yes | √(22.5 × EPS $9.69 × BVPS $27.32) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $162.97 | 1.54x | yes | EBITDA $0.84B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $66.42 | 3.78x | yes | FCF $438.5M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $62.17 | 4.03x | yes | SBC-adj FCF $0.42B (FCF $0.44B − SBC $0.02B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $312.66 | 0.80x | yes | EPS $9.69 × (8.5 + 2×15.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $18.27 | 13.72x | yes | BV $27.32 × (ROIC 5.7% / WACC 8.5%) |
| P/Sales Sector | Relative | $196.60 | 1.28x | yes | Revenue $4.35B × sector P/S 2.5x |
| PEG Fair Value | Relative | $313.60 | 0.80x | yes | EPS $9.69 × (PEG 1.5 × growth 21.6% (input: historical EPS growth)) → PE 32.4x |
| Earnings Yield | Earnings | $104.76 | 2.39x | yes | EPS $9.69 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $1.0b |
| Net debt / NOPAT (after-tax) | 1.79x |
| Net debt / operating income (pre-tax) | 1.41x |
| Interest coverage | 12.3x |
| Share count CAGR (buyback) | -1.7% |
| Burning cash | no |
Bullet Takeaways
- Lincoln Electric is, by its own account, "the world's largest manufacturer of arc welding solutions", selling consumables, equipment, and automation across a global industrial base with few broad-line competitors.
- The business is high quality, a 16.6% operating margin and double-digit revenue growth in the most recent quarter, funded with modest leverage of under 1.5 times operating income.
- The stock trades at a rich multiple of profits, around 22 times operating income, so the price is paying for durable compounding to continue, and the near-term swing factor is how quickly pricing catches up to input costs.
Bull Case
The balance sheet tells you how management thinks about its own business, and Lincoln Electric's is the picture of a company confident in its cash generation. Net debt sits at under 1.5 times operating income, interest is covered more than twelve times, and the company funds growth investments, dividends, and buybacks out of a steady stream of cash rather than borrowing. That conservative posture is not timidity; it is the freedom to keep investing through cycles, commissioning a new automated manufacturing line that the company says tripled productivity while it returns cash to owners. A company that can self-fund expansion and capital return at the same time is one that does not need the capital markets to compound.
The franchise behind that balance sheet is genuinely dominant. Lincoln Electric describes itself as "the world's largest manufacturer of arc welding solutions" with "relatively few global broad-line competitors worldwide". The consumables business is the quiet engine: welding wire and electrodes are consumed in use and reordered continuously, which gives Lincoln a recurring-revenue base that smooths the cyclicality of the equipment side. Layered on top is automation, where the company is leaning in through its RISE strategy and customer programs, selling not just the welder but the integrated, often robotic, welding cell. That moves Lincoln up the value chain into higher-margin, stickier systems.
The recent numbers show the model working. Sales grew 11.7% to $1.12 billion in the most recent quarter, ahead of expectations, with an operating margin holding at 16.6% and adjusted EBITDA margin of 19.2%. The growth was price-led, which is exactly what a dominant supplier with few competitors should be able to do, push price through to protect margins. Pair pricing power, a recurring consumables base, a growing automation business, and a balance sheet built to keep investing, and the bull case is a high-quality industrial compounder that controls its own destiny.
Bear Case
The uncomfortable truth a Lincoln Electric holder has to face is that the multiple is pricing in compounding that has not happened yet. At about 22 times operating income, the price requires operating profit to grow roughly 22% a year for five years, and only the forward-growth method reaches the current price at all. Every static frame, the asset-value, earnings-power, and peer-multiple methods, sits well below it. That is the market paying a durability premium, and durability premiums are only justified if the durability actually shows up. Lincoln is an excellent company, but a 22% compounding assumption is aggressive for a mature industrial whose end markets, construction, energy, heavy manufacturing, are themselves cyclical.
The recent growth was price, not volume, and that matters for the assumption. The quarter's 11.7% sales growth was described as price-led, and gross margin actually slipped 80 basis points on price-cost lag, the gap between rising input costs and the pricing actions meant to recover them. Price-led growth is real growth, but it is harder to sustain than volume-led growth: there is a ceiling on how much price a customer absorbs, and once input costs stabilize, the pricing tailwind fades. Management itself expects price-cost to be roughly neutral by the third quarter, which means the recent growth rate is unlikely to be the run-rate.
The cyclicality is the structural risk under the premium. Welding demand tracks industrial production, construction, and capital spending, all of which turn down in recessions. A durable compounder priced at 22 times earnings has a long way to fall if growth reverts to the low single digits that mature industrial markets typically deliver. The balance sheet is sound, net debt under 1.5 times operating income with strong coverage, so this is not a solvency risk; it is a valuation risk. The bear case is straightforward: Lincoln is a wonderful business, but the price is the bet, and the price assumes a growth rate the company is unlikely to sustain once pricing normalizes and the cycle turns.
Valuation
Lincoln Electric is the inverse of the cheap industrials around it: the price is demanding, not discounted. At today's quote the shares trade around 22 times company-wide operating income, which inverts to an assumption that operating profit grows roughly 22% a year for five years. For a mature, high-quality welding manufacturer, that is a stretch, and the most recent quarter is a reminder why: the 11.7% sales growth was price-led, and price-led growth tends to fade as input costs stabilize.
The disagreement among methods is the whole signal. Only the forward-growth methods reach the current price; the asset-value, earnings-power, and peer-multiple methods all sit well below it. When only the growth family reaches the price and every static frame falls short, the market is paying a durability premium, the value the static methods structurally cannot capture because they do not credit compounding. The spread between the methods and the price IS that premium, and it is a real one here: Lincoln's pricing power, recurring consumables base, and automation push are the kind of qualities that can justify a premium. The question the spread poses is whether they justify a premium this large, given that the assumed growth rate runs well ahead of what a mature industrial usually delivers.
Solvency is a clean tailwind, not a constraint. Net debt sits at under 1.5 times operating income, with interest covered more than twelve times, so the balance sheet poses no risk and gives management the freedom to keep investing in automation through the cycle. The share count is declining about 1.7% a year. The downside here is not solvency; it is the valuation itself. A premium multiple on a cyclical industrial means the stock carries the risk that growth reverts toward the low single digits typical of the end markets, in which case the premium compresses even if the business stays excellent.
Catalysts
The first quarter of 2026 was a strong, price-led beat. Sales rose 11.7% year over year to $1.12 billion, above expectations, with operating margin holding at 16.6% and adjusted EBITDA margin of 19.2%. Gross margin slipped 80 basis points to 35.6% on price-cost lag, the temporary gap between rising input costs and the pricing actions meant to recover them.
Management framed the path forward around pricing normalization and automation. It expects price-cost to be roughly neutral by the third quarter, with Americas Welding operating margins in the mid-18% to mid-19% range, International near 11%, and the Harris business around 19% to 20%. The company also pointed to early progress on its new RISE strategy and the Spotlight customer program, and to a newly commissioned automated manufacturing line that it said tripled productivity.
The near-term watch item is whether pricing fully catches up to input costs by the third quarter, which would stabilize gross margin, and whether volume growth picks up as the pricing tailwind fades. The longer-dated catalyst is the automation push: if Lincoln can keep moving customers toward integrated, robotic welding systems, it lifts both the growth rate and the mix toward higher-value sales the premium multiple is counting on.
Peer Cohorts (Per Segment, With Filing Citations)
Americas Welding / International Welding (reported)
- ESAB (ESAB Corporation)
- (no filing in the citation store)
- ITW (ILLINOIS TOOL WORKS INC)
- (no filing in the citation store)
- DOV (DOVER Corp)
- (no filing in the citation store)
- NDSN (NORDSON CORPORATION)
- (no filing in the citation store)
- GGG (GRACO INC.)
- (no filing in the citation store)
Harris Products Group (reported)
- ESAB (ESAB Corporation)
- (no filing in the citation store)
- ITW (ILLINOIS TOOL WORKS INC)
- (no filing in the citation store)
- DOV (DOVER Corp)
- (no filing in the citation store)
- KAI (KADANT INC)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
Lincoln Electric Q1 2026 earnings call, April 2026 · Lincoln Electric Q1 2026 earnings release, April 2026