Ecolab is quite a boring business (read more) for many investors – stable, steadily growing but with little upside for dynamic acceleration. Most of revenues are recurring and business is rather safe. This is why investors pay a premium in valuation and shares are performing quite well (+5% YTD). Also it should be noted that Ecolab share performance has exceeded the S&P 500 in 21 of the past 25 years, rising 4,206% compared with the S&P 500’s 519% increase. This is history and how are current financial results?

Well, it is not a good time for Ecolab’s business – results are weaker on a y/y basis.

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Weakness comes from Global Energy segment and higher corporate costs. Until oil price goes up significantly Global Energy segment might be under pressure. Also currency changes impacted negatively financial results (Reported operating income decreased 6% to $413 million. Excluding the impact of special (gains) and charges from both 2016 and 2015 reported results, our adjusted operating income decreased 3% and our adjusted fixed currency operating income increased 3%).

 

Valuation is very demanding:

P/E = 26

EV/EBITDA = 14

Dividend yield = 1.2%

Shares are around all-time highs.

 

Summing up, I like ECL and in long term I see a lot of growth opportunities for Ecolab business, but I see no point in buying shares now at such high price.

 

Disclaimer ECL – no position