- If you are wondering whether Linde at around US$478 per share offers fair value or whether you are paying up for quality, this breakdown is designed to help you make sense of the price tag.
- The stock is down 3.9% over the last 7 days and 3.7% over the last 30 days, while year to date it shows an 11.4% return and a 5.5% return over the last year, with longer term returns of 43.2% over 3 years and 82.1% over 5 years.
- Recent headlines have focused on Linde's position as a major industrial gases player and its role in supplying key end markets. This often puts the stock on watchlists during periods of sector attention. These news items help frame the recent pullback in the context of a company that many investors monitor closely when reassessing exposure to materials and industrials names.
- On Simply Wall St's value checks, Linde scores just 1 out of 6. The next sections will walk through different valuation approaches and then circle back to an even more complete way of thinking about what the stock might be worth.
Linde scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Linde Discounted Cash Flow (DCF) Analysis
A DCF model estimates what a company might be worth by projecting its future cash flows and discounting them back to today, so you can compare that value with the current share price.
For Linde, the model used is a 2 Stage Free Cash Flow to Equity approach based on cash flow projections in $. The latest twelve month free cash flow is about $5.7b. Analyst inputs and extrapolations feed into a path that reaches projected free cash flow of about $9.1b in 2030, with additional estimates extending out to 2035.
Simply Wall St aggregates these projected cash flows, discounts them to today and arrives at an estimated intrinsic value of about $399.74 per share. Compared with a recent share price of around $478, this implies the stock is about 19.6% overvalued according to this model.
This single model points to Linde trading at a premium to the cash flows currently built into the forecast.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Linde may be overvalued by 19.6%. Discover 55 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Linde Price vs Earnings
P/E is a common way to assess profitable companies because it links what you pay for each share to the earnings that business is already generating. A higher or lower P/E often reflects what the market is willing to pay for those earnings, given expectations and perceived risk.
In general, stronger expected earnings growth and lower risk can justify a higher P/E, while slower expected growth and higher risk usually point to a lower, more conservative P/E being reasonable.
Linde currently trades on a P/E of 32.11x. That sits above the Chemicals industry average of 26.44x, but below the peer group average of 34.94x. Simply Wall St also calculates a proprietary Fair Ratio of 27.29x for Linde. This Fair Ratio aims to estimate what a P/E might look like after adjusting for factors such as earnings growth, industry, profit margin, market cap and company specific risks.
Because the Fair Ratio blends these fundamentals into a single benchmark, it can be more tailored than blunt comparisons with peers or the broader industry.
Compared with the Fair Ratio of 27.29x, Linde's actual P/E of 32.11x points to the shares trading at a premium on this metric.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Linde Narrative
Earlier it was mentioned that there is an even better way to think about valuation. On Simply Wall St this takes the form of Narratives, where you set out your view of Linde's story, link it to your own assumptions for future revenue, earnings and margins, let the platform translate that into a fair value, then compare that fair value with the current price to decide whether the stock looks appealing or not. All of this is available within an accessible tool on the Community page that is used by millions of investors and automatically refreshes as new news or earnings arrive. For example, one investor might build a Narrative around the higher analyst price target of US$576 with stronger earnings assumptions, while another might anchor to the lower target of US$381 with more cautious expectations.
Do you think there's more to the story for Linde? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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