Lincoln Electric has been treading water for the past six months, holding steady at $187.01. The stock also fell short of the S&P 500’s 9.9% gain during that period.
Is now the time to buy Lincoln Electric, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.We're swiping left on Lincoln Electric for now. Here are three reasons why we avoid LECO and a stock we'd rather own.
Why Is Lincoln Electric Not Exciting?
Headquartered in Ohio, Lincoln Electric (NASDAQ:LECO) manufactures and sells welding equipment for various industries.
1. Long-Term Revenue Growth Disappoints
A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Lincoln Electric grew its sales at a mediocre 6.1% compounded annual growth rate. This fell short of our benchmark for the industrials sector. 
2. Slow Organic Growth Suggests Waning Demand In Core Business
We can better understand Professional Tools and Equipment companies by analyzing their organic revenue. This metric gives visibility into Lincoln Electric’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Lincoln Electric’s organic revenue averaged 1.5% year-on-year growth. This performance was underwhelming and suggests it may need to improve its products, pricing, or go-to-market strategy, which can add an extra layer of complexity to its operations. 
3. Recent EPS Growth Below Our Standards
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Lincoln Electric’s EPS grew at an unimpressive 7.4% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 4.9% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
Lincoln Electric isn’t a terrible business, but it doesn’t pass our quality test. With its shares lagging the market recently, the stock trades at 21× forward price-to-earnings (or $187.01 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. Let us point you toward MercadoLibre, the Amazon and PayPal of Latin America.
Stocks We Would Buy Instead of Lincoln Electric
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