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Should You Be Happy With Ecolab Inc.'s (NYSE:ECL) 9.1% Earnings Growth?

Today I will take a look at Ecolab Inc.'s (NYSE:ECL) most recent earnings update (31 December 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the chemicals industry performed. As an investor, I find it beneficial to assess ECL’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.

Check out our latest analysis for Ecolab

Were ECL's earnings stronger than its past performances and the industry?

ECL's trailing twelve-month earnings (from 31 December 2019) of US$1.6b has increased by 9.1% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 8.1%, indicating the rate at which ECL is growing has accelerated. What's enabled this growth? Let's take a look at if it is merely due to an industry uplift, or if Ecolab has experienced some company-specific growth.

NYSE:ECL Income Statement April 18th 2020
NYSE:ECL Income Statement April 18th 2020

In terms of returns from investment, Ecolab has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 8.4% exceeds the US Chemicals industry of 6.1%, indicating Ecolab has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Ecolab’s debt level, has increased over the past 3 years from 13% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 89% to 73% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. While Ecolab has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Ecolab to get a better picture of the stock by looking at:

  1. 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.

  2. 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.

  3. 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 31 December 2019. This may not be consistent with full year annual report figures.

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.

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. Thank you for reading.

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