Linde PLC (LIN, Financial) has recently seen a daily gain of 4.53% and a 3-month gain of 10.37%, reflecting positive market sentiment. However, with an Earnings Per Share (EPS) of 12.11, investors are tasked with determining whether the stock is currently overvalued. This article aims to provide a comprehensive valuation analysis of Linde PLC (LIN), exploring whether its market price aligns with its intrinsic value as estimated by GuruFocus' proprietary GF Value.
Company Introduction
Linde PLC is a global leader in industrial gases, boasting a significant presence in over 100 countries. The company's core products include atmospheric gases like oxygen and nitrogen, process gases such as hydrogen, and essential industrial gas production equipment. Linde PLC serves a multitude of industries, from healthcare to steelmaking. In 2022, Linde generated approximately $33 billion in revenue and $5.4 billion in GAAP operating profit. Despite these impressive figures, Linde PLC's stock price of $426.72 suggests a potential misalignment with its GF Value of $358.89, indicating that the stock might be modestly overvalued.
Summarize GF Value
The GF Value is a unique metric that represents the intrinsic value of a stock. It is calculated by analyzing historical trading multiples, an adjustment factor based on the company's past performance, and future business estimates. According to the GF Value, the fair trading value of Linde PLC's stock should be around $358.89. The current market cap of Linde PLC is $206.90 billion, and its stock price of $426.72 suggests that it is modestly overvalued. This misalignment could imply a lower future return than the company's business growth.
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Financial Strength
When investing, it's crucial to consider a company's financial strength to avoid the risk of permanent capital loss. Linde PLC's cash-to-debt ratio of 0.22 places it lower than 78.08% of its peers in the Chemicals industry. Despite this, GuruFocus ranks Linde PLC's financial strength as fair, with a score of 7 out of 10. This assessment suggests that the company maintains a reasonable level of financial health.
Profitability and Growth
Investing in profitable companies, especially those with a history of consistent profitability, bears less risk. Linde PLC stands out with high profit margins, having been profitable for the last 10 years. With a revenue of $32.50 billion and an operating margin of 23.94%, Linde PLC demonstrates strong profitability, ranking better than 94.21% of its industry counterparts. The company's growth is also commendable, with a 3-year average annual revenue growth rate of 8.5%.
ROIC vs. WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) provides insight into its value creation. Linde PLC's ROIC of 7.69 is currently lower than its WACC of 9.21, suggesting that the company may not be generating sufficient returns relative to its capital costs.
Conclusion
In conclusion, Linde PLC (LIN, Financial) appears to be modestly overvalued according to GuruFocus' GF Value. The company's financial condition is fair, and its profitability is robust. Linde PLC's growth rates are competitive within the Chemicals industry. To gain deeper insights into Linde PLC's financials, interested investors can explore its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
