Analysis of Linde 2016

Company: Linde 

ISIN DE0006483001 | WKN 648300 

Business: A German gas & engineering company. It is divided into three divisions: Gases (production and distribution of gases ranging from oxygen to acetylene and argon), Engineering (engineer and construction of industrial plants for gas extraction) as well as Gist (logistics and supply of gas products). 

Active: world wide in more than 100 countries with 600 affiliated companies. 

P/E: 21.1

Here you can find the previous analysis of Linde 2015. 

The P/E is too high for me with 21.1 but the P/B is ok with 1.6, still Graham would not be interested in this company. The earnings to sales I find to be ok with 6% but the ROE is awful with 7.4%. The book to debt ratio is ok with 0.8.
In the last five years they have had an excellent yearly revenue growth rate of 5.4% which gives us a motivated P/E of 16 to 20 and Linde is therefore fairly valued by the market today.
They try to protect their turf and are therefore spending around 11% on R&D which could maybe be pushed up a little.
They pay a so, so dividend in the size of 2.6% which correspond to 56% of their earnings so they better keep pushing up their earnings.

Conclusion: Graham says no to Linde and so do I. This is however an excellent company that almost never is cheap so the question one should ask oneself is if the price today is fair compared to the quality of the company. I think it is. Still for me the P/E is still too high, the P/B is ok but the ROE is awful and the dividend is only just acceptable so I will not go for this one.

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