Lincoln Electric (NASDAQ:LECO) has continued to appreciate since my August 2016 piece,
as investors have piled into a wide assortment of companies leveraged
to an industrial recovery and potential infrastructure stimulus. Volume
has actually turned up for Lincoln in recent quarters, with only a
handful of major end-markets still weighing on results, and the
prospects for sales growth over the next few years are good.
Management continues to do a good job of expanding into alloy welding and automation, but the announced acquisition of Air Liquide's (OTCPK:AIQUY)
welding business is a significant opportunity to improve its European
business, expand its alloy and automation opportunities, and drive real
improvements in margins while making life even more challenging for Colfax (NYSE:CFX) in its core market.
At
a mid-teens multiple to forward EBITDA, I cannot call these shares
"cheap." But then, the implied total return in the high single-digits
from my discounted cash flow model for a company that has steadily
gained share, generated double-digit ROICs, and organically created new
growth opportunities isn't exactly out of line either. A slowdown in the
industrial recovery (whether real or imagined by the Street) is
certainly a threat to the share price, but this is the sort of name you
want to add to on pullbacks.
Follow this link for more:
Air Liquide Adds Value As Lincoln Electric Moves Into Recovery Mode
