ECL - Embedded Expectations Analysis - 2020 05 07
Ecolab Inc. (ECL:USA) currently trades near historical highs relative to UAFRS-based (Uniform) earnings, with a 37.4x Uniform P/E, implying bullish expectations for the firm. However, management may have concerns about their plant contamination, revenue growth, and the impact of COVID-19Specifically, management may lack confidence in their ability to meet their adjusted EPS guidance, capitalize on the growing industrial food production trend in China, and accelerate Pest business growth. Moreover, they may have concerns about slowing economic growth, the lag of new business on results, and lost business from their product recall. In addition, they may be exaggerating the progress of their contaminated plant's recovery and the Champion X divestiture, and they may have concerns about the uncertain impact of COVID-19 on sales and headcount reductions in their North America Oilfield Chemicals 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
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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