5
Linde plc (LIN)
- Equity
- UK
- Basic Materials
RISK
RETURN
Key risk factors
Negligible price volatility
Strong & resilient to price shocks
Good trading liquidity
Key return factors
Greatly overvalued vs peers
Good growth
Decent dividends
Corporate actions & dividendsDividend of USD 1.390 with an ex-date of 04 Jun 2024.
Company profileLinde plc operates as an industrial gas and engineering company in North and South America, Europe, the Middle East, Africa, and the Asia Pacific. It offers atmospheric gases, including oxygen, nitrogen, argon, and rare gases; and process gases, such as carbon dioxide, helium, hydrogen, electronic gases, specialty gases, and acetylene. The company also designs and constructs turnkey process plants for third-party customers, as well as for the gas businesses in various locations, such as olefin, natural gas, air separation, hydrogen, and synthesis gas plants. It serves a range of industries, including healthcare, energy, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals, and water treatment. The company was founded in 1879 and is based in Woking, the United Kingdom.
Valuation: Greatly overvalued
Multiple
TTM
NTM
P/E
33.30
30.90
PEG
8.10
-
P/B
5.40
4.50
P/S
5.60
6.20
P/FCF
39.20
40.00
EV/EBITDA
18.50
21.50
Considering past and projected metrics, the stock is distinctly 'expensive' compared to its peers. Specifically, the stock is expensive' on P/E, overvalued on EV/EBITDA, and overpriced on P/FCF.
Performance: Mixed
The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 5ppts over past six months and grown 3ppts slower in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.
Analyst view: Somewhat favourable
The average target price is 450 and suggests 3% upside potential. Usually, this means a HOLD recommendation among investment firms. This neutral recommendation suggests no significant price movement, up or down, in the next 12 months. The most optimistic analyst has a target price of 540.0. This translates into 24% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 381.0. This is equivalent to 13% downside potential in the worst case.
Profitability: Good
RoE
Linde plc reported a return on equity (RoE) of 16.1% in the last 12 months, up from 15.5% in FY23. The market consensus projects an RoE of 16.0% in FY24, again ahead of its peers.
RoA
Another important profitability metric, return on assets (RoA), amounted to 7.8% in the last 12 months, an increase from 7.7% in FY23. The market analysts predict that RoA will be 7.7% in FY24, again stronger than its peers.
RoCE
In the last 12 months, the return on capital employed (RoCE) declined to 9.6%, above the peers. The consensus estimate for FY24 for RoCE is 12.8%, again ahead of the peers.
Net margin
EBITDA margin
Historically, LIN has reported strong net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 17.0%, a growth from 16.6% in FY23. The company has reported good EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 32.7% in the last 12 months, up from 32.2% in FY23.
RoIC / WACC = 1.4(average value creation)
The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.4 in the past several years. This ratio implies a average shareholder value creation. Growth: Good
Revenue
EBITDA
EPS
Free cash flow
LIN reported revenue of USD 37 192mn in the last 12 months, down 0% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 2% from FY23 to USD 12.97. Market expects EPS to reach USD 14.1024 in FY24.Revenue growth has been constrained in the past several years (negative-to-neutral), while EBITDA growth has been steady. This all contributed to fast EPS growth (positive). The FCF trend is in line with EBITDA. We emphasize the highly volatile dynamics of FCF. On the positive side, revenue dynamics is very stable.
Dividends: Decent
Dividend paid
Dividend yield
The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, and there is an evident trend. In the past 12 months, the dividend yield has been low and below its peers. On average, the company pays dividends quarterly, which may appeal to investors valuing a regular income stream.
Default risk: Limited
The risk of default is minimal. We note robust profitability, strong debt servicing capacity, adequate interest coverage, solid cash flow generation, and an favourable capital structure, among the positive credit factors. Among the negative credit factors, we point to slow historical revenue growth, excessive margin volatility, and poor working capital management.
Volatility: Negligible
In normal market circumstances, LIN is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible.
Stress-test: Negligible
In highly turbulent market conditions, LIN is not volatile. In other words, the stock will fall far less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be very low.
Selling difficulty: Low
LIN boasts high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually stable and remains mildly favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions.
Country risk: Very low
The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.
Other risks: Negligible
No other major risks have been identified.