LIN

Financial health: Fair5.9/10

5 strengths, 3 concerns. Weakest points: current ratio, earnings growth, peg ratio.

• Debt to equity: 0.71 (Watch, benchmark < 0.5) — Debt of 0.71x equity is moderate against the 0.5x benchmark. It has deteriorated over the last 4 years.
• Net debt vs cash flow: 4.3y (Watch, benchmark < 4 years) — Net debt of $21.9B is 4.3x annual free cash flow — about 4 years of cash flow to repay.
• Current ratio: 0.88 (Concern, benchmark > 1.5) — Short-term assets cover only 0.88x short-term liabilities — below 1.0, meaning bills due this year exceed the assets on hand to pay them. It has improved over the last 4 years.
• Return on equity: 17.7% (Strong, benchmark > 15%) — Earns 17.7% on shareholder equity, comfortably past the > 15% mark.
• Gross margin: 47.9% (Strong, benchmark > 40%) — Keeps 47.9% of revenue after the direct cost of sales, comfortably past the > 40% mark.
• Net margin: 19.3% (Strong, benchmark > 10%) — Turns 19.3% of revenue into profit, comfortably past the > 10% mark.
• Free cash flow: $5.1B (Strong, benchmark positive) — Generated $5.1B of free cash flow after capital spending. It has deteriorated over the last 4 years.
• Revenue growth: 9.2% (Watch, benchmark > 10%) — Revenue changed 9.2% year on year, short of the > 10% mark.
• Earnings growth: -10.5% (Concern, benchmark > 10%) — Earnings changed -10.5% year on year, well short of the > 10% mark.
• PEG ratio: 2.05 (Concern, benchmark < 1) — At 2.05, the price looks expensive relative to expected growth — Lynch treated 1.0 as fair value.
• Payout ratio: 41.8% (Strong, benchmark < 60%) — Pays out 41.8% of earnings as dividends, leaving room to keep paying.