LINDE PLC (LIN) stock intrinsic value fair value estimate & owner earnings analysis

Linde is a global industrial gases company with 2025 sales of $33,986 million. It sells oxygen, nitrogen, hydrogen and other gases three ways: piped directly from plants built next to large customers (on-site), delivered as bulk liquid (merchant), and in cylinders (packaged). On-site supply contracts typically run 10 to 20 years and carry minimum purchase requirements and price escalation clauses. The company also builds plants for third parties through an engineering unit, which was 25% of German sales in 2025. How we measure earnings. We start with operating cash flow, then remove swings in working capital (receivables, inventory, payables and contract balances), subtract share-based pay as a real cost, and subtract the capital spending needed to keep the business running. The share of spending that mechanically counts as growth is small because sales have been roughly flat since 2022, so nearly all capital spending is treated as upkeep. That is conservative here: Linde says 2025 capital spending of $5,261 million (up from $4,497 million in 2024) went mainly to new plants for its backlog, and at the end of 2025 large plants under construction had an estimated capital cost of about $7.3 billion. Owner earnings after this treatment were about $5.9 billion in 2023, $5.6 billion in 2024 and $5.3 billion in 2025. Cash earnings before capital spending rose from about $8.4 billion in 2021 to about $10.4 billion in 2025, but capital spending rose faster, so what is left for owners has slipped for three straight years. Depreciation and amortization ($3,763 million in 2025) is already added back in operating cash flow. The business was reshaped by the 2018 merger of Linde and Praxair, so we use only later years, and within them the last three, which reflect today's higher spending. Our earnings level is the middle of those three years, about $5.6 billion, or roughly $12 per current share on about 465 million shares. Base case (about $178 per share). Owner earnings fell about 6% in 2025, and capital spending rose again in the first half of 2026 ($2,780 million against $2,527 million a year earlier), so we assume a further 6% fall in the first year, to about $5.3 billion, roughly the 2025 level. From year 2 through year 10 we credit 2% annual growth, below the roughly 3% annual sales growth from 2019 to 2025, supported by the escalation clauses in 10 to 20 year on-site contracts and by plants already under construction. After year 10 we hold earnings flat for 20 more years, because plants built for 10 to 20 year contracts keep producing after those contracts, then assign no value beyond that. We do not credit new markets such as hydrogen or share gains, and no margin improvement. Bear case (about $111 per share). Owner earnings keep falling 5% a year for three years (similar to the declines of about 4% in 2024 and 6% in 2025) to about $4.5 billion and then stay flat, with value assumed only for 20 years in total. Linde also has to pay out the $1.2 billion it carries as a contingent liability to a Russian customer, RusChemAlliance, which won judgments in St. Petersburg over advance payments on terminated engineering projects; Linde is contesting these in Hong Kong arbitration. Debt rose to $26,989 million at the end of 2025 from $21,623 million a year earlier, and interest paid rose to $548 million from $443 million, so the business is more leveraged, though it is already paying those costs in the cash flow we use. Bull case (about $216 per share). The plants under construction come online and capital spending falls back, so owner earnings return to the 2023 level of about $5.9 billion and grow 3% a year for 10 years, matching the growth in pre-capital cash earnings seen in 2025 (about 3%), then stay flat for 20 more years. What could make this estimate wrong. If Linde's newest plants earn low returns, owner earnings could keep falling beyond our bear case. If backlog spending is truly growth spending and returns arrive as promised, our base case is too low. Share repurchases ($4,601 million in 2025) and dividends ($2,811 million) exceeded the $5.1 billion of operating cash flow left after capital spending, with the gap covered partly by borrowing, and we give no credit for repurchases in per-share value. Several Russian-related matters cannot be fully resolved from the filings. Value per share reflects Linde's roughly 465 million diluted shares in the second quarter of 2026. Given falling owner earnings and rising debt, the margin-of-safety price is about $105 per share, below our bear case.