ECL - Embedded Expectations Analysis - 2018 12 19
Ecolab Inc. (ECL:USA) currently trades above recent averages relative to UAFRS-based (Uniform) Earnings, with a 25.6x Uniform P/E, implying bullish expectations for the firm. However, management has concerns about their ability to expand, increase their prices, and offset rising raw material costsSpecifically, management may lack confidence in their ability to find strategic acquisition targets, and to use the Anios brand to expand their business more aggressively. Additionally, they may be exaggerating their ability to increase gross profits if raw material prices stabilize, and may lack confidence in their ability to offset elevated raw material prices. Moreover, they may lack confidence in their ability to increase their prices, and may be concerned about the impact of Diversey's aggressive pricing on their institutional business. Furthermore, they may be concerned about inconsistent growth trends in the healthcare industry, and may lack confidence in their ability to expand their textile care business
Ecolab is a provider of water, hygiene and energy technologies and services. The company's segments include: Global Industrial, which provides water treatment and process applications, and cleaning and sanitizing solutions in the manufacturing, food and beverage processing, chemical, power generation, pharmaceutical and commercial laundry industries; Global Institutional, which provides cleaning and sanitizing products to the foodservice, hospitality, lodging, healthcare, government, education and retail industries; and Global Energy, which serves the process chemicals and water treatment needs of the global petroleum and petrochemical industries in both upstream and downstream applications.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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