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Linde - Tax Structures Aside, It's Overvalued And A 'Hold'

Aug. 02, 2021 9:13 PM ETLinde plc (LIN)7 Comments


  • Linde is the largest chemical company in the entire world and a company I've had on my watchlist since I started investing.
  • I never pulled the trigger unfortunately, either due to overvaluation or due to other companies being more appealing.
  • While Linde is an excellent stock, its valuation and upside are not excellent. On the basis of valuation, it's doubtful if you should buy Linde here.
Fabrik i Delaware med Linde Nordamerika gasleverantör
krblokhin/iStock Editorial via Getty Images

I haven't written about Linde (NYSE:LIN) before, so I thought now was a good time to start. This is a truly massive company - the largest in terms of market share and revenue. It serves customers in virtually every industry directly or indirectly, and it's

This article was written by

Wolf Report profile picture

Mid-thirties DGI investor/senior analyst in private portfolio management/wealth management for a select number of clients. Invests in USA, Canada, Germany, Scandinavia, France, UK, BeNeLux. My aim is to only buy undervalued/fairly valued stocks and to be an authority on value investments as well as related topics.

I am a contributor for iREIT on Alpha as well as Dividend Kings here on Seeking Alpha and work as a Senior Research Analyst for Wide Moat Research LLC.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of NHYDY either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

While this article may sound like financial advice, please observe that the author is not a CFA or in any way licensed to give financial advice. It may be structured as such, but it is not financial advice. Investors are required and expected to do their own due diligence and research prior to any investment. Short-term trading, options trading/investment and futures trading are potentially extremely risky investment styles. They generally are not appropriate for someone with limited capital, limited investment experience, or a lack of understanding for the necessary risk tolerance involved. I own the European/Scandinavian tickers (not the ADRs) of all European/Scandinavian companies listed in my articles. I own the Canadian tickers of all Canadian stocks i write about.

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Comments (7)

Seems the author is correct on the valuation here
You presented a strong case FOR LIN.
LookingAtStocks profile picture
Go LIN!!!
Where did you get your "fair levels that are considered 15x P/E and 20-25x”? First of all valuation is an output supported by fundamentals not your imaginary “fair” multiple that you don’t even know how to properly think about valuation. Second, the investment thesis on this name is margin expansion and margin parity and share buybacks supporting double digit eps growth, even assuming multiples don’t expand, the upside is apparently there especially as a inflation beneficiary in the near term
BM Cashflow Detective profile picture

The current valuation shows that the market expects faster earnings growth from $LIN than from its competitors.

But all of this is known and the market has already priced in the increased growth with a very poor 5y PEG ratio of 3.24 .

Oh, the doorbell is ringing. One moment.

Ah hello Mr. Templeton, sir, nice to see you.

Yes, yes you are right, investors are currently so euphoric again.

"The four most dangerous words in investing are:
'this time it's different' "
- Sir John Templeton

I know it's really dangerous, we can't repeat it enough, unfortunately only a few others still don't know. Upside trend is another dangerous word for it.

History repeats itself again and again, in this respect everything stays the same. It never seems to be any different.
@BM Cashflow Detective PEG is not a proper valuation metric for Linde, let alone your valuation is based on GAAP which no one uses. First of all, like I said to many people on this forum, learn non-gaap accounting and how to properly adjust numbers. Also when you think about valuation it’s always fwd year not historical.

Once you master the technical skills needed to conduct basic financial modeling, then you can quote more “this and that”.

Above peer growth is real, as APD reports, people will have more appreciation on LIN.
BM Cashflow Detective profile picture

The main value of the PEG ratio is that it is an easy calculation and assigns a relative value to expected future earnings growth of a company. In other words, it allows the analyst to compare the valuation of companies with different growth rates. It is a more thorough picture of valuation than the P / E ratio alone. Even if future assumptions have a speculative character with deviation rates, they offer a very good opportunity to be roughly right instead of exactly wrong.

In my many years of practical experience, this works extremely well.

I am not denying the quality of $LIN. It makes perfect sense to hold overvalued stocks and benefit from long-term compound interest.

But it makes much less sense to buy overvalued stock and to increase the valuation risk disproportionately and to justify it with still more upside potential. There will always come a moment when growth stocks disappoint and correct the overvaluation within the framework of the mean reversion. Optimism while disregarding overvaluation is usually a very risky mixture.

By the way, I've own $APD shares for many years. But I wouldn't recommend buying this stock at the moment, even if the outlook looks comparably good.
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