Stock (Symbol) |
Ecolab (ECL) |
Stock Price |
$134 |
Sector |
| Food & Necessities |
Data is as of |
| June 20, 2017 |
Expected to Report |
| Jul 31 |
Company Description |
 Ecolab Inc. provides water, hygiene and energy technologies and services. Operating segments include Global Industrial, Global Institutional, Global Energy and Other. The Company’s Global Industrial segment consists of the Water, Food and Beverage, Paper and Textile Care operating units. Global Institutional segment consists of the Institutional, Specialty and Healthcare operating units. The Global Energy segment provides on-site, technology-driven solutions to the global drilling, oil and gas production, refining, and petrochemical industries. Other segment consists of the pest elimination and equipment care operating units. The Company’s cleaning and sanitizing programs and products, pest elimination services and equipment maintenance and repair services support customers in the food service, food & beverage processing, hospitality, healthcare, Government & education, retail, textile care & commercial facilities in 170 countries. Source: Thomson Financial |
Sharek’s Take |
 Ecolab (ECL) management expects growth to improve throughout the remainder of 2017. Analysts share this opinion, and have projected profit growth of 4%, 11%, 15% and 19% the next 4 qtrs. But at a current price of 28x earnings, most if not all the good news is baked into the stock. 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. It went public in 1957 then changed its name to Ecolab in 1986, and has increased its dividend each year since. The company boasts 6000 patents and 1500 scientists who continue to innovate, creating new and better products. Ecolab’s products serve 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 and (7) Pest elimination. ECL is usually a double-digit profit grower. But in 2015 growth was just 5% as low oil prices caused a slowdown in production. Then ECL had flat profit growth last year as profits were crimped by a slow Energy market (23% of sales) and foreign exchange, with around half the F/X cost from Venezuela’s devaluation. This is a quality, conservative stock with 90% recurring revenue and clean annual reports. Through 2015, ECL had grown profits 14% a year the prior 20 years — and management has a target 15% profit growth every year. Bill Gates even owns 10% of the shares. But investors have to pay up for quality. ECL has an Est. LTG of 12% in addition to a 1% yield, but has a rich P/E of 28. I still think this is a great buy-and-hold stock for conservative investors. |
One Year Chart |
 Last qtr profits grew 4% as sales increased 2%. ECL missed analysts estimates by a penny, and 2017 estimates declined by a penny. The stock has had quite a ride higher the last year — even through profits continue to come in below-par. Qtrly Estimates call for profit growth of 4%, 11% 15% and 19% the next 4 qtrs which would be accelerating growth — and that could be good. But the stock’s already at its highs high and trades for 28x earnings. |
Fair Value |
 Ecolab always seems to be overvalued, but with a string of record profit years like this it’s easy to see why. My Fair Value is 26x earnings which equates to $124 this year and $139 next year. The stock’s right in the middle of that range for the 2nd straight qtr. |
Bottom Line |
 Ecolab’s profit growth is expected to have better times ahead, but it seems smart investors already know this and have pushed the stock to All-Time highs. Overall this is a solid core investment for conservative investors who relish in buying-and-holding. This is one of the safest stocks in the world with most of its revenues recurring and a dividend that’s been raised thirty years. I’m also a big fan of the Est. LTG of 12% per year in addition to a 1% yield. But with its rich valuation, ECL ranks just 25th of 33 stocks in the Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 25 of 33 |
