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Will Ecolab Inc.'s (NYSE:ECL) Earnings Grow In The Next Couple Of Years?

Simply Wall St

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The latest earnings update Ecolab Inc. (NYSE:ECL) released in December 2018 signalled that the business experienced a slight headwind with earnings declining from US$1.5b to US$1.4b, a change of -5.0%. Below, I've presented key growth figures on how market analysts view Ecolab's earnings growth outlook over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.

Check out our latest analysis for Ecolab

Market analysts' consensus outlook for next year seems optimistic, with earnings growing by a robust 15%. This growth seems to continue into the following year with rates arriving at double digit 30% compared to today’s earnings, and finally hitting US$2.1b by 2022.

NYSE:ECL Past and Future Earnings, April 9th 2019

Even though it’s useful to understand the growth each year relative to today’s value, it may be more beneficial to determine the rate at which the earnings are growing every year, on average. The pro of this technique is that it ignores near term flucuations and accounts for the overarching direction of Ecolab's earnings trajectory over time, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 11%. This means, we can expect Ecolab will grow its earnings by 11% every year for the next few years.

Next Steps:

For Ecolab, I've compiled three fundamental aspects you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is ECL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ECL is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of ECL? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.