LINCOLN ELECTRIC HOLDINGS INC (LECO): what the price assumes
In the published model solve dated 2026-Q2, anchored at $284.89, LINCOLN ELECTRIC HOLDINGS INC (LECO) is priced for +20.1% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.
Generated: 2026-08-30 · Exported: 2026-08-31 · Source: https://boothcheck.com/report/LECO
Headline
| Field | Value |
|---|---|
| Ticker | LECO |
| Company | LINCOLN ELECTRIC HOLDINGS INC |
| Current price | $284.90/sh |
| Composition | Consumables 54% / Equipment 26% / Automation 21% |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 13.9% |
| Operating margin today | 17.1% |
| Margin compression (value-band) | -3.2pp |
| Implied growth | 20.1% |
| Multiple paid | 22x operating income |
The operating-margin figure is value-band context at year 12: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
Solve inputs: computed at a 9.4% cost of capital with 4% terminal growth over a 5-year stage.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | +0.17σ |
| cohort percentile (of 225 peers) | 56 |
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 | 2.59x | 5 | expensive |
| Earnings | 3.04x | 5 | expensive |
| Relative | 1.75x | 2 | expensive |
| Growth | 1.14x | 3 | expensive |
Families that justify the price: Growth Families that call it expensive: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.7%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $250.42 | 1.14x | yes | FCF base $0.6B, growth 9% (input: historical growth), terminal g 4.0%, WACC 8.7%, 6yr projection |
| DCF Exit Multiple | Growth | $305.46 | 0.93x | yes | Exit EV/EBITDA: 17.0x / 19.0x / 21.0x (bear / base = today's held flat / bull), 6yr |
| Relative Valuation | Relative | — | — | no | P/E 21.02x (blended: static sector reference 18x + trailing (TTM) 28x), scenarios: 17.4x / 21.0x / 24.6x (bear / base = reference held flat / bull), EV/EBITDA 14.09x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $109.79 | 2.59x | yes | BV/sh $28.51, ROE (TTM) 35.6%, ke 9.3% |
| Two-Stage Excess Return | Asset | $231.15 | 1.23x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $245.81 | 1.16x | yes | Rev $4.5B, growth 9% (input: historical growth; tapered), Terminal P/S: 2.9x / 3.5x / 4.1x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $135.56 | 2.10x | yes | EPS $10.01, growth 14% (input: historical EPS growth), PEG=2.07 (Overvalued) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $93.82 | 3.04x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.69B × (1−24%) / WACC 8.7% → EPV (no growth) |
| Residual Income | Asset | $171.47 | 1.66x | yes | BV $28.51 + 5yr PV of (ROE (TTM) 35.6% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $80.14 | 3.55x | yes | √(22.5 × EPS $10.01 × BVPS $28.51) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | EBITDA $0.87B × sector EV/EBITDA 12.0x |
| FCF Yield | Earnings | $89.97 | 3.17x | yes | FCF $542.4M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $85.47 | 3.33x | yes | SBC-adj FCF $0.52B (FCF $0.54B − SBC $0.02B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $298.53 | 0.95x | yes | EPS $10.01 × (8.5 + 2×13.5%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | $22.06 | 12.91x | yes | BV $28.51 × (ROIC 6.7% / WACC 8.7%) |
| P/Sales Sector | Relative | — | — | no | Revenue $4.48B × sector P/S 2.5x |
| PEG Fair Value | Relative | $203.33 | 1.40x | yes | EPS $10.01 × (PEG 1.5 × growth 13.5% (input: historical EPS growth)) → PE 20.3x |
| Earnings Yield | Earnings | $108.22 | 2.63x | yes | EPS $10.01 / 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 | — |
Economic-Unit Decomposition (Sum Of The Parts)
One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.
| Unit | Role | Valuation basis | Revenue | Reported profit | Value evidence | Status |
|---|---|---|---|---|---|---|
| Americas Welding | operating | enterprise | $2.7b | $534.8m operating-income | withheld | unresolved no unit value |
| International Welding | operating | enterprise | $930.9m | $110.6m operating-income | withheld | unresolved no unit value |
| Harris Products Group | operating | enterprise | $578.6m | $107.6m operating-income | withheld | unresolved no unit value |
No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.
Solvency
| Field | Value |
|---|---|
| Net debt | $1.1b |
| Net debt / NOPAT (after-tax) | 1.83x |
| Net debt / operating income (pre-tax) | 1.40x |
| Interest coverage | 13.1x |
| Share count CAGR (buyback) | -1.6% |
| 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)
- FY2025 10-K: …four acquisitions and we expect to complete more acquisitions in the future. See Part II, Item 8. Note 5, "Acquisitions" and Note 21, "Subsequent Events" of this Form 10-K for further information. The Company The Company has been built through a series of acquisitions, as well as organic growth. We seek to build an…
- FY2025 10-K: …Our sales channels include both independent distributors and direct salespeople that, depending on geography and end market, sell our products to our end users. ESAB is based in North Bethesda, Maryland and employs approximately 10,300 associates and serves customers in approximately 150 countries. We believe our…
- ITW (ILLINOIS TOOL WORKS INC)
- FY2025 10-K: …growth in the MTS Test & Simulation business. ◦ Electronics organic revenue decreased 1.3% primarily due to a decline in the consumer electronics end market, partially offset by higher demand in the consumable semiconductor end market. The electronics assembly businesses declined 11.1% primarily due to lower demand…
- FY2025 10-K: …Company's competitors include many regional or specialized companies, as well as large U.S. and non-U.S. companies or divisions of large companies. Each of the Company's segments generally has several main competitors and numerous smaller ones in most of their end markets and geographic areas. In addition to numerous…
- DOV (DOVER Corp)
- FY2025 10-K: …and HVAC industry, food production markets and beverage can-making industries. Our Climate & Sustainability Technologies segment's products are manufactured primarily in North America, Europe and Asia and are sold globally, directly and through a network of distributors. 11 Table of Contents Raw Materials We use a…
- FY2025 10-K: …and remote monitoring of clean and traditional fuels, cryogenic gases and other hazardous substances, as well as safe and efficient operation of convenience retail, retail fueling and vehicle wash establishments across the globe. Among solutions supplied by the segment are dispensing equipment and components for…
- NDSN (NORDSON CORPORATION)
- FY2025 10-K: …us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:NetInvestmentHedgingMember us-gaap:InterestExpenseMember 2023-11-01 2024-10-31 0000072331 us-gaap:ForeignExchangeContractMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:NetInvestmentHedgingMember us-gaap:InterestExpenseMember 2022-11-01 2023-10-31…
- FY2025 10-K: …boards, flexible circuits, consumer electronics, as well as consumer non-durable, film extrusion and converting, cable and tubing and energy storage. Manufacturing, Raw Materials and Other Resources Our production operations include machining, molding and assembly. We manufacture specially designed parts and assemble…
- GGG (GRACO INC.)
- FY2025 10-K: …Outside of the U.S., our operations located in Australia, Belgium, Spain, Japan, Italy, Korea, India, the P.R.C., the United Kingdom and Brazil distribute our Company's products and reinforce our commitment to those regions. Our manufacturing capacity is sufficient for current business demand levels. In 2024 and…
- FY2025 10-K: Industrial Segment The Industrial segment represented approximately 45 percent of our total sales in 2025. It includes the Industrial and Powder divisions. The Industrial segment markets equipment and solutions for moving and applying paints, powder coatings, sealants, adhesives and other fluids. Markets served…
Harris Products Group (reported)
- ESAB (ESAB Corporation)
- FY2025 10-K: …in the EMEA & APAC segment. 6. Revenue The Company provides fabrication technology advanced equipment, consumables, gas control equipment, related robotics and digital solutions. Substantially all revenue is recognized at a point in time. The Company disaggregates its revenue into the product groups: Year Ended…
- FY2025 10-K: …four acquisitions and we expect to complete more acquisitions in the future. See Part II, Item 8. Note 5, "Acquisitions" and Note 21, "Subsequent Events" of this Form 10-K for further information. The Company The Company has been built through a series of acquisitions, as well as organic growth. We seek to build an…
- ITW (ILLINOIS TOOL WORKS INC)
- FY2025 10-K: …products. Businesses in this segment produce engineered adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. This segment primarily serves the automotive aftermarket, general industrial and MRO markets. Products in this segment include: •…
- FY2025 10-K: …the automotive aftermarket, general industrial and MRO markets. Products in this segment include: • adhesives for industrial, construction and consumer purposes; • chemical fluids which clean or add lubrication to machines; • epoxy and resin-based coating products for industrial applications; • hand wipes and…
- DOV (DOVER Corp)
- FY2025 10-K: …and measurement period adjustments. SIQ's hardware and software products expand the Company's ability to deliver a comprehensive solution that brings actionable intelligence and remote hardware service to retailers and service companies within the Clean Energy & Fueling segment. In connection with this acquisition,…
- FY2025 10-K: , retail fueling and vehicle wash establishments. • Our Imaging & Identification segment supplies precision marking and coding, product traceability, brand protection and digital textile printing equipment, as well as related consumables, software and services to the global packaged and consumer goods, pharmaceutical,…
- KAI (KADANT INC)
- FY2025 10-K: …the packaging, paper and tissue, food, energy, defense and numerous other industrial sectors. The Flow Control segment consists of our fluid-handling and doctoring, cleaning, & filtration product lines. Fluid-Handling We develop, manufacture and market fluid-handling systems, equipment and integrated technologies…
- FY2025 10-K: 6 to 2043, related to fluid handling and doctoring, cleaning, and filtration equipment. From time to time, we enter into licenses with other companies for products that serve the pulp, papermaking, converting, and paper recycling industries. Industrial Processing Segment We have numerous U.S. and foreign patents,…
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.
- Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
- 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