Assessing Ecolab Inc’s (NYSE:ECL) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Ecolab is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its chemicals industry peers.
How Did ECL’s Recent Performance Stack Up Against Its Past?
ECL’s trailing twelve-month earnings (from 30 September 2018) of US$1.6b has jumped 22% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 8.8%, indicating the rate at which ECL is growing has accelerated. What’s enabled this growth? Let’s take a look at whether it is solely a result of industry tailwinds, or if Ecolab has experienced some company-specific growth.
In terms of returns from investment, Ecolab has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.1% exceeds the US Chemicals industry of 7.9%, indicating Ecolab has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Ecolab’s debt level, has declined over the past 3 years from 12% to 12%.
What does this mean?
Ecolab’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Ecolab to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ECL’s future growth? Take a look at our free research report of analyst consensus for ECL’s outlook.
- Financial Health: Are ECL’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 September 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.