Was Lincoln Electric Holdings Inc’s (NASDAQ:LECO) Earnings Growth Better Than The Industry’s?
When Lincoln Electric Holdings Inc (NASDAQ:LECO) released its most recent earnings update (30 September 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Lincoln Electric Holdings has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see LECO has performed. Check out our latest analysis for Lincoln Electric Holdings
Were LECO’s earnings stronger than its past performances and the industry?
I like to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to examine different companies on a more comparable basis, using the most relevant data points. For Lincoln Electric Holdings, its latest earnings (trailing twelve month) is US$276.72M, which, against the previous year’s figure, has risen by 42.86%. Since these values are somewhat myopic, I have estimated an annualized five-year value for Lincoln Electric Holdings’s earnings, which stands at US$222.75M This suggests that, on average, Lincoln Electric Holdings has been able to consistently grow its profits over the last few years as well.
What’s enabled this growth? Let’s see if it is merely due to industry tailwinds, or if Lincoln Electric Holdings has seen some company-specific growth. Even though both top-line and bottom-line growth rates in the past few years, were, on average, negative, earnings were more so. While this resulted in a margin contraction, it has moderated Lincoln Electric Holdings’s earnings contraction. Eyeballing growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 19.58% over the previous year, and a more subdued 3.85% over the previous five years. This means any uplift the industry is gaining from, Lincoln Electric Holdings is able to amplify this to its advantage.
What does this mean?
Lincoln Electric Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Lincoln Electric Holdings has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Lincoln Electric Holdings to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for LECO’s future growth? Take a look at our free research report of analyst consensus for LECO’s outlook.
2. Financial Health: Is LECO’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.