Lincoln Electric Holdings, Inc. (LECO): A Bull Case Theory

We came across a bullish thesis on Lincoln Electric Holdings, Inc.  on r/ValueInvesting by u/cyclist63c. In this article, we will summarize the bulls’ thesis on LECO. Lincoln Electric Holdings, Inc. ‘s share was trading at $251.14 as of January 13th. LECO’s trailing and forward P/E were 26.95 and 23.42 respectively according to Yahoo Finance.

Lincoln Electric Holdings, Inc., through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products in the United States and internationally. The company is presented as a high quality compounder where strong fundamentals, rather than valuation expansion, drive the investment case. The company posts exceptional returns on capital, with return on equity and return on capital employed consistently above 25%, supported by solid margins and disciplined capital allocation.

While the current price to book multiple of roughly 9.5x appears expensive relative to historical medians, the argument is that valuation changes matter far less over long periods when a business can reinvest capital at very high rates. LECO has demonstrated this ability clearly, nearly doubling its equity base between 2020 and 2025, more than doubling operating income, and growing revenue at a healthy pace, all while effectively deploying retained earnings.

Capital returns further enhance shareholder outcomes. When reinvestment opportunities are limited, LECO increases dividends and consistently repurchases shares, retiring roughly 2 % of the share count annually. This combination explains why the stock has doubled since 2020, closely tracking the doubling of earnings.

 If valuation multiples remain flat, investors can reasonably expect returns driven by a 1.3 % dividend yield, a roughly 2 % buyback yield, and net income growth of about 14 % per year, translating into potential annual returns of 17 % or more if historical performance persists.

The business model supports this outlook. LECO is the global market leader in welding tools, operating in an industry conducive to strong margins and durable capital returns. Unlike capital intensive or demand fragile sectors, welding tools benefit from long term global infrastructure and industrial growth.

With population expansion and industrialization in regions such as Southeast Asia and Africa, demand appears structurally supportive. While deeper industry analysis is still required, LECO serves as a clear example of how high return businesses can deliver attractive long term compounding without relying on multiple expansion.

Previously we covered a bullish thesis on Hubbell Incorporated by Stock Analysis Compilation in December 2024, which highlighted the U.S. grid modernization, energy transition, and accretive acquisition tailwinds. The company’s stock price has appreciated approximately by 3.11% since our coverage. cyclist63c shares a similar view but emphasizes on high returns on capital and disciplined capital allocation.

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Disclosure: None.