Quick Report on Linde (LIN)

We've been asking ourselves recently if the market has placed a fair valuation on Linde. Let's dive into some of the fundamental values of this large-cap Industrials company to determine if there might be an opportunity here for value-minded investors.

The Market May Be Overvaluing Linde's Earnings and Assets:

Linde plc operates as an industrial gas company in North and South America, Europe, the Middle East, Africa, and the Asia Pacific. The company belongs to the Industrials sector, which has an average price to earnings (P/E) ratio of 20.49 and an average price to book (P/B) ratio of 3.78. In contrast, Linde has a trailing 12 month P/E ratio of 32.9 and a P/B ratio of 4.6.

Linde's PEG ratio is 3.51, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.

Shareholders Are Confronted With a Declining EPS Growth Trend:

2019-02-09 2020-03-02 2021-03-01 2022-02-28 2023-02-28
Revenue (MM) $14,836 $28,228 $27,243 $30,793 $33,364
Gross Margins 39.0% 41.0% 44.0% 43.0% 42.0%
Operating Margins 15% 12% 12% 16% 16%
Net Margins 30.0% 8.0% 9.0% 12.0% 12.0%
Net Income (MM) $4,381 $2,285 $2,501 $3,826 $4,147
Net Interest Expense (MM) -$202 -$38 -$115 -$77 -$63
Depreciation & Amort. (MM) -$1,830 -$4,675 -$4,626 -$4,635 -$4,204
Earnings Per Share $13.11 $4.19 $4.71 $7.36 $7.95
EPS Growth n/a -68.04% 12.41% 56.26% 8.02%
Diluted Shares (MM) 334 545 531 520 522
Free Cash Flow (MM) $5,537 $9,801 $10,829 $12,811 $12,037
Capital Expenditures (MM) -$1,883 -$3,682 -$3,400 -$3,086 -$3,173
Net Current Assets (MM) -$19,018 -$24,625 -$27,723 -$26,005 -$25,224
Long Term Debt (MM) $12,288 $10,693 $12,152 $11,335 $12,198
Net Debt / EBITDA 2.66 1.42 1.55 1.18 1.3

Linde has wider gross margins than its peer group, average operating margins with a stable trend, and healthy leverage. However, the firm has declining EPS growth. Finally, we note that Linde has weak revenue growth and a flat capital expenditure trend and irregular cash flows.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.