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Lincoln Electric Holdings, Inc. (LECO) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Lincoln Electric Holdings, Inc. (LECO)

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Intrinsic Value (DCF)

Current$263.56
→
Intrinsic$161.98
-39%
$105.44$161.98$269.41
Market implies 23% growth for 5 years
Current price reflects execution expectations above 12% growth — not unreasonable for quality businesses.
At $264, the market prices in continued strong cash flow growth (23%) — likely reflecting buybacks, margin stability, and ecosystem strength.
Range: Bear $105 → Bull $269. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →8%10%12%14%
8%$197$216$236$258
10%$135$148$162$177
12%$101$110$121$132
14%$79$87$95$104

Bull Case

  • Bull case ($269) offers 2% upside at 14% growth, 9% discount
  • Conservative 12% growth assumption is achievable based on track record

Bear Case

  • Bear case ($105) implies 60% downside at 9% growth, 12% discount
  • Price reflects 23% growth expectations vs 12% historical — high bar to clear
  • Trading 39% above base case — execution must exceed assumptions to justify
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5-Year Free Cash Flow Projection

Year 1$538.97M
Year 2$602.21M
Year 3$672.87M
Year 4$751.82M
Year 5$840.03M
Terminal$12.36B

📐 Model Inputs

Growth Rate11.7%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$482.37MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. See FAQ below for full methodology.

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Frequently Asked Questions

Is LECO stock undervalued or overvalued?
🔴 OVERVALUED

LECO trades at $263.56 vs. our DCF-derived intrinsic value of $161.98, implying -36% downside. Using a 10.0% WACC and 11.7% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($235.68) suggests limited upside.

What is LECO's intrinsic value?

Using a 5-year DCF model: Base FCF of $482M, projected at 11.7% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $939M net debt and dividing by 0.06B shares: Bear $108.66 | Base $161.98 | Bull $235.68. Current price $263.56 implies -36% to base case.

How is LECO's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 11.7% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($10.20B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 21.2x.