Reviewing Lincoln Electric (LECO) and Its Peers

Lincoln Electric (NASDAQ:LECO) is one of 434 public companies in the “Machinery” industry, but how does it compare to its rivals? We will compare Lincoln Electric to related businesses based on the strength of its valuation, analyst recommendations, dividends, earnings, profitability, risk and institutional ownership.

Dividends

Lincoln Electric pays an annual dividend of $3.16 per share and has a dividend yield of 1.2%. Lincoln Electric pays out 31.6% of its earnings in the form of a dividend. As a group, “Machinery” companies pay a dividend yield of 2.5% and pay out 27.3% of their earnings in the form of a dividend. Lincoln Electric has raised its dividend for 30 consecutive years. Lincoln Electric lags its rivals as a dividend stock, given its lower dividend yield and higher payout ratio.

Earnings and Valuation

This table compares Lincoln Electric and its rivals revenue, earnings per share and valuation.

	Gross Revenue	Net Income	Price/Earnings Ratio
Lincoln Electric	$4.23 billion	$520.53 million	27.23
Lincoln Electric Competitors	$4.50 billion	$346.86 million	-27.29

Lincoln Electric’s rivals have higher revenue, but lower earnings than Lincoln Electric. Lincoln Electric is trading at a higher price-to-earnings ratio than its rivals, indicating that it is currently more expensive than other companies in its industry.

Profitability

This table compares Lincoln Electric and its rivals’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lincoln Electric	12.35%	39.23%	15.25%
Lincoln Electric Competitors	-1,946.96%	-10.16%	0.86%

Institutional and Insider Ownership

79.6% of Lincoln Electric shares are held by institutional investors. Comparatively, 52.2% of shares of all “Machinery” companies are held by institutional investors. 1.7% of Lincoln Electric shares are held by insiders. Comparatively, 13.9% of shares of all “Machinery” companies are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Volatility and Risk

Lincoln Electric has a beta of 1.21, suggesting that its share price is 21% more volatile than the S&P 500. Comparatively, Lincoln Electric’s rivals have a beta of 4.53, suggesting that their average share price is 353% more volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations for Lincoln Electric and its rivals, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lincoln Electric	0	4	5	1	2.70
Lincoln Electric Competitors	4080	14476	17893	777	2.41

Lincoln Electric currently has a consensus target price of $307.22, suggesting a potential upside of 12.70%. As a group, “Machinery” companies have a potential upside of 33.57%. Given Lincoln Electric’s rivals higher possible upside, analysts clearly believe Lincoln Electric has less favorable growth aspects than its rivals.

Summary

Lincoln Electric beats its rivals on 9 of the 15 factors compared.

Lincoln Electric Company Profile

Lincoln Electric Holdings, Inc., through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products worldwide. The company operates through three segments: Americas Welding, International Welding, and The Harris Products Group. It offers brazing and soldering filler metals, arc welding equipment, plasma and oxyfuel cutting systems, wire feeding systems, fume control equipment, welding accessories, and specialty gas regulators, and education solutions, as well as a portfolio of automated solutions for joining, cutting, material handling, module assembly, and end of line testing, as well as involved in brazing and soldering alloys, and in the retail business in the United States. In addition, the company manufactures copper and aluminum headers, distributor assemblies, and manifolds for the heating, ventilation, and air conditioning sector in the United States and Mexico; provides specialty welding consumables, wear plates and maintenance and repair services for alloy and wear-resistant products used in mining, steel, agricultural, and industrial mill applications; and designs and manufactures robotic assembly and arc welding systems that automate the tacking and welding of steel beams. Further, the company serves general fabrication, oil and gas, power generation, process, automotive and transportation, and construction and infrastructure industries, as well as heavy fabrication, ship building, and maintenance and repair markets. It sells its products directly to users of welding products, as well as through industrial distributors, retailers, and agents. The company was founded in 1895 and is headquartered in Cleveland, Ohio.