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Is Linde plc (NYSE:LIN) Too Expensive at 61.14x Price To Earnings?


Linde plc (NYSE:LIN) is currently trading at $262.04, at approximately 96.4% of its 52-week high of $269.78. With the stock price up 31.8% in the last year, investors are worried that the company is getting too expensive. So, is Linde plc overvalued? In this article, we’ll discuss Linde plc’s valuation using different valuation models.

Historical Valuation

One of the quickest ways to spot if a company is getting too expensive is to compare the current valuation to its historical one. We can use the price to sales ratio to cut the noise and avoid the volatility of the company’s earnings.

Considering Linde plc’s latest twelve months revenue/share of $51.61 and using the company’s 5-year average price to sales of 4.07x as a benchmark, we have a fair value of $210.30, which is -19.7% lower than the current price.

With no surprise, we can see that Linde plc’s price to sales of 5.1x is much higher than its 5-year average of 4.1x, indicating that the company is probably trading in overbought territory. We can easily visualize trends in the company’s fundamentals using the Finbox chart editor, as depicted below.

Source: Finbox Chart’s Engine

Absolute Valuation: Linde plc DCF Analysis

Using a company’s historical valuation as a benchmark could lead to misleading results if a change in its fundamentals justifies the current valuation. So it’s always preferable to take into account the latest financial forecast and analyze the company with an absolute valuation model.

So, let’s analyze Linde plc with a 5Y DCF analysis (EBITDA exit method). Using the latest 5Y revenue forecast CAGR of 3.5%, an average EBITDA margin forecast of 32.8%, a discount rate of 8.0%, and a terminal EBITDA multiple of 13.8x, we get a fair value of $231.0.

So, Is Linde plc Overvalued?

Relying only on one or two financial models to determine a company’s fair value is never a good idea. It’s always preferable to use different models before coming to hasty conclusions.

The Finbox Fair Value Estimate is an advanced financial modeling technology that uses eleven different models to estimate the fair value of a stock and lets you get a company’s fair value at your fingertips. All the models are based on the same data utilized by the biggest investment banks and money managers in the world.

According to the estimate, Linde plc’s fair value is $204.42, representing a -21.5% downside from the current price. Below are the fair value estimates for each model.

Source: Finbox Fair Value Estimates

Company’s Profile: Linde plc

Linde plc operates as an industrial gas company in North and South America, Europe, the Middle East, Africa, and the Asia Pacific. The company offers oxygen, nitrogen, argon, rare gases, carbon monoxide, carbon dioxide, helium, hydrogen, electronic gases, specialty gases, and acetylene. It also designs and constructs turnkey process plants, such as olefin, natural gas, air separation, and hydrogen and synthesis gas plants. The company serves healthcare, petroleum refining, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals, and water treatment industries. Linde plc was founded in 1879 and is based in Guildford, the United Kingdom.

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