With EPS Growth And More, Lincoln Electric Holdings (NASDAQ:LECO) Makes An Interesting Case

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But as Peter Lynch said in One Up On Wall Street, 'Long shots almost never pay off.' Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Lincoln Electric Holdings (NASDAQ:LECO). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Lincoln Electric Holdings with the means to add long-term value to shareholders.

View our latest analysis for Lincoln Electric Holdings

Lincoln Electric Holdings' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Shareholders will be happy to know that Lincoln Electric Holdings' EPS has grown 22% each year, compound, over three years. If the company can sustain that sort of growth, we'd expect shareholders to come away satisfied.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. EBIT margins for Lincoln Electric Holdings remained fairly unchanged over the last year, however the company should be pleased to report its revenue growth for the period of 14% to US$3.9b. That's a real positive.

The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Lincoln Electric Holdings' forecast profits?

Are Lincoln Electric Holdings Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$9.6b company like Lincoln Electric Holdings. But we do take comfort from the fact that they are investors in the company. We note that their impressive stake in the company is worth US$121m. Holders should find this level of insider commitment quite encouraging, since it would ensure that the leaders of the company would also experience their success, or failure, with the stock.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Well, based on the CEO pay, you'd argue that they are indeed. For companies with market capitalisations over US$8.0b, like Lincoln Electric Holdings, the median CEO pay is around US$12m.

The Lincoln Electric Holdings CEO received US$10m in compensation for the year ending December 2022. That comes in below the average for similar sized companies and seems pretty reasonable. CEO compensation is hardly the most important aspect of a company to consider, but when it's reasonable, that gives a little more confidence that leadership are looking out for shareholder interests. It can also be a sign of good governance, more generally.

Is Lincoln Electric Holdings Worth Keeping An Eye On?

If you believe that share price follows earnings per share you should definitely be delving further into Lincoln Electric Holdings' strong EPS growth. If you need more convincing beyond that EPS growth rate, don't forget about the reasonable remuneration and the high insider ownership. Everyone has their own preferences when it comes to investing but it definitely makes Lincoln Electric Holdings look rather interesting indeed. Even so, be aware that Lincoln Electric Holdings is showing 2 warning signs in our investment analysis , you should know about...

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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.