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A Clean Company

Ecolab (ECL) is a clean company, the worldwide leader in cleaning chemicals. The company was founded in 1923 as Economics Laboratory. Its 1st product was Absorbit which cleaned carpets on the spot and eliminated the need for hotels to be shut down to be cleaned. Over the years the company expanded exponentially and now serves the following industries:

  1. Food and beverage manufacturing plants
  2. Water purifying plants
  3. Housekeeping
  4. Food retailers & supermarkets
  5. Hospitals & healthcare facilities
  6. Power plants & oil refineries
  7. Pest elimination

Economics Laboratory went public in 1957 then changed its name to Ecolab in 1986, and has increased its dividend every year since. The company gets a top safety rating of 1 from Value Line. When I read ECL’s annual reports, the company shows ten years of financial data and all the numbers match the ones I got from other sources — clean financials just like its products.

Ten Year Chart

ECL_2015_Q3_10yrDuring the past decade, Ecolab has had its stock grow 13% per year in addition to paying a dividend of 1% and buying back shares. The share buybacks help during turbulent times like today’s — when the stock market drops fast-and-hard management can come in and buy back stock, reducing the downside.

During the decade ECL had only one year when profits failed to grow at a double-digit rate, the recession year of 2009. This year profits are also expected to grow less than 10% due to a weak oil industry and strong dollar. Ecolab gets half its sales from abroad.

Profit History

ECL_2015_Q3_PHAlthough profits tend to grow in the low-teens, ECL deserves a P/E in the mid-20s because of its safety and consistency in growing each and every year. The stock is currently selling around its Fair Value, as it should. Smart investors know this is a quality holding. Like Bill Gates does, he owns 10% of the shares.

Sharek’s Take

Ecolab is a clean company — both within its business and with its financials. This is a fantastic holding for conservative buy-and-hold investors looking for total returns of 10% per year. But in the short-term, this stock is fairly valued and is being held back by both a weak oil sector and a strong dollar.

View the One Year Chart here.
View the Earnings Table here.

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