Critical Survey: Lincoln Electric (NASDAQ:LECO) & NN (NASDAQ:NNBR)

Lincoln Electric (NASDAQ:LECO) and NN (NASDAQ:NNBR) are both industrial products companies, but which is the superior investment? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, institutional ownership, earnings, dividends, profitability and risk.

Profitability

This table compares Lincoln Electric and NN’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lincoln Electric 9.97% 41.01% 13.79%
NN 32.94% 5.90% 1.50%

Risk & Volatility

Lincoln Electric has a beta of 1.17, suggesting that its share price is 17% more volatile than the S&P 500. Comparatively, NN has a beta of 3.28, suggesting that its share price is 228% more volatile than the S&P 500.

Valuation & Earnings

This table compares Lincoln Electric and NN’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Lincoln Electric $2.66 billion 2.93 $206.12 million $4.15 31.60
NN $427.53 million 0.51 -$100.59 million ($0.16) -31.94

Lincoln Electric has higher revenue and earnings than NN. NN is trading at a lower price-to-earnings ratio than Lincoln Electric, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

74.2% of Lincoln Electric shares are held by institutional investors. Comparatively, 84.9% of NN shares are held by institutional investors. 3.4% of Lincoln Electric shares are held by insiders. Comparatively, 2.1% of NN shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Lincoln Electric and NN, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lincoln Electric 0 3 4 0 2.57
NN 0 1 1 0 2.50

Lincoln Electric presently has a consensus target price of $134.00, suggesting a potential upside of 2.17%. NN has a consensus target price of $9.00, suggesting a potential upside of 76.13%. Given NN’s higher possible upside, analysts plainly believe NN is more favorable than Lincoln Electric.

Summary

Lincoln Electric beats NN on 10 of the 14 factors compared between the two stocks.

Lincoln Electric Company Profile

Lincoln Electric Holdings, Inc. engages in the manufacture of arc welding equipment, consumable welding products and other welding and cutting products. Its welding products include arc welding power sources, wire feeding systems, robotic welding packages, fume extraction equipment, consumable electrodes and fluxes. The firm offers CNC plasma and oxy-fuel cutting systems, regulators and torches used in oxy-fuel welding, cutting and brazing. It operates through the following segments: Americas Welding, International Welding and The Harris Products Group. The Americas Welding segment includes welding operations in North and South America. The International Welding segment primarily includes welding operations in Europe, Africa, Asia, and Australia. The Harris Products Group includes the company’s global cutting, soldering and brazing businesses as well as the retail business in the United States. The company was founded on 1895 and is headquartered in Cleveland, OH.

NN Company Profile

NN, Inc. engages in the design and manufacture high-precision components and assemblies primarily for the electrical, automotive, general industrial, aerospace and defense, and medical markets. It operates through the Mobile Solutions and Power Solutions segments. The Mobile Solutions segment manufactures system critical components for fuel systems, engines and transmissions, power steering systems, and electromechanical motors. The Power Solutions segment designs and produces a broad range of high-precision metal and plastic components, assemblies, and finished devices used in applications ranging from power control to flight control, and for military devices. The company was founded by Richard D. Ennen in October 1980 and is headquartered in Charlotte, NC.

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