Should You Investigate Ecolab Inc. (NYSE:ECL) At US$226?

By
Simply Wall St
Published
January 13, 2022
NYSE:ECL
Source: Shutterstock

Today we're going to take a look at the well-established Ecolab Inc. (NYSE:ECL). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$236 at one point, and dropping to the lows of US$212. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ecolab's current trading price of US$226 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ecolab’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for Ecolab

What is Ecolab worth?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 7.0% below my intrinsic value, which means if you buy Ecolab today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $243.64, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Ecolab’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of Ecolab look like?

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NYSE:ECL Earnings and Revenue Growth January 13th 2022

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Ecolab's earnings over the next few years are expected to increase by 99%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? ECL’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on ECL, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Ecolab at this point in time. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Ecolab.

If you are no longer interested in Ecolab, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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