Table of Contents
- Ecolab's market and competition
- The last Ecolab quarterly figures of December 2024
- Ecolab stock forecast 2025
- Key figures for the Ecolab stock from the Levermann analysis
- Valuation of the Ecolab stock
- Conclusion on the Ecolab Stock
Ecolab (ISIN: US2788651006) is a leading global provider of water, hygiene and infection prevention solutions. The stock is considered a quality stock that combines stability with long-term growth potential – even if the current valuation appears demanding.
The stock has always been expensive, but investors have still achieved considerable price gains. The price increase over ten years is 126 per cent, and including dividends it is almost 140 per cent.
Source: StocksGuide
One reason for this is the deep moat of the Ecolab Stock, which ensures pricing power and high margins. In today's Ecolab stock analysis, we want to take a closer look at what the latest business figures say and what the outlook looks like. The question remains: Is the stock worth its high price?
Company profile – water, hygiene and infection prevention
Ecolab is a global company specialising in water, hygiene and infection control solutions. Its business model is based primarily on the sale of products, services and digital solutions that enable customers to make their operations more efficient, safe and sustainable.
Ecolab combines chemical products, technology and personal service with great success to create tailored solutions, as its history shows. The business is now divided into four different sectors:
- Global Industrial
- Global Institutional & Specialty
- Global Healthcare & Life Sciences
- Global Pest Elimination
Source: Company presentation
In the Global Industrial segment, Ecolab targets customers in the food and beverage, pulp and paper, energy, mining, manufacturing and chemical industries. Its offering includes water treatment programmes for industrial processes, process chemicals and digital systems for monitoring and optimising plants. The aim is to reduce water and energy consumption, optimise production processes and extend the service life of technical equipment. These measures help Ecolab's customers to operate more efficiently while complying with environmental regulations. The segment is the largest of all, accounting for around 50 per cent of sales.
The Global Institutional & Specialty segment is in second place with a share of around 33 per cent. It focuses on customers in the hotel and restaurant industry, retail, community catering, the education sector, laundries and leisure facilities. In this area, Ecolab offers cleaning and disinfection solutions for kitchens, public areas and laundries, including automated dosing systems, training programmes for staff and digital hygiene management systems. The added value for customers lies in improving hygiene standards, ensuring compliance with legal requirements, increasing operational efficiency and ultimately providing an enhanced customer experience.
In the Global Healthcare & Life Sciences segment, Ecolab primarily serves hospitals, care facilities and companies in the pharmaceutical and biotechnology industries. Here, the company offers solutions for infection prevention, including products for hand and surface disinfection, sterilisation technologies and specialised cleaning programmes for clean rooms. In addition, Ecolab supports compliance with strict regulatory requirements, such as those under FDA or EU GMP guidelines, with validation and documentation services. The aim is to ensure patient safety, reduce the risk of nosocomial infections and ensure hygienic manufacturing processes in the pharmaceutical industry. With a revenue share of around 8 per cent, the segment is less important for the group. The same applies to the smallest segment, pest control.
The last segment, Global Pest Elimination, represents a revenue share of around 7 per cent and focuses on integrated pest control solutions for customers in the food processing, retail, healthcare, and hospitality industries. Ecolab offers preventive inspections, environmentally friendly pest control methods and comprehensive documentation systems that enable seamless traceability and compliance with hygiene standards. The aim is to protect companies from economic damage and reputational loss due to pest infestation and to reliably meet legal hygiene requirements.
At the category level, product and equipment sales as well as service and leasing revenues can be identified. The largest share of sales is attributable to product and equipment sales, i.e. the sale of chemicals, cleaning and disinfecting agents, as well as technical equipment and dosing systems. In 2024, sales here amounted to around 12.5 billion US dollars. Based on total sales of 15.7 billion US dollars, this corresponds to a sales share of almost 80 per cent.
The second largest category is service and leasing revenues, i.e. services such as regular maintenance, consulting, training, digital monitoring systems and equipment leasing. In 2024, Ecolab generated around 3.3 billion US dollars in this area, which corresponds to around 20 per cent of net sales. This area is particularly important for long-term customer loyalty because Ecolab often works with its own service personnel on site, thus continuously creating added value for its customers. In 2024, this area will have grown at an above-average rate of 8.9 per cent.
Ecolab thus pursues a business model that is characterised predominantly by product sales, but also generates recurring revenues from consumables and a stable service business. The combination of product sales and accompanying services ensures plannable revenues and a low level of customer integration.
Ecolab's market and competition
Ecolab, in its various business areas, is in competition with a large number of companies that have different areas of focus depending on the market segment. These are both large multinational corporations and specialised providers in niche markets.
For example, Ecolab is the world leader in providing water, hygiene and infection protection solutions, particularly in the commercial and industrial sectors. Concrete global market shares vary by segment. However, Ecolab holds significant market shares of 30 to over 50 per cent in many of its core markets, particularly in North America. Ecolab is considered the undisputed industry leader in the field of commercial hygiene and cleaning services and industrial water treatment.
One of its most important competitors is the unlisted company Solisens. It operates in the water treatment and industrial processes sectors in the same markets. The US company offers chemical solutions and services for industrial water applications worldwide and has recently been able to further expand its market position by acquiring Diversey. Another relevant competitor is Kurita Water Industries from Japan, which focuses on industrial water treatment and process optimisation. Veolia Water Technologies, a division of the French company Veolia, also offers complete solutions for water and wastewater treatment and competes directly with Ecolab in many markets.
In the cleaning, hygiene and disinfection segment, Ecolab competes, among others, with Diversey, which offers professional cleaning solutions for hotels, hospitals and food companies. After its acquisition by Solenis, Diversey is part of a larger industrial group. Reckitt Benckiser, known for brands such as Dettol and Lysol, is mainly active in the field of disinfection, both in the consumer market and in the professional sector. Another competitor is Procter & Gamble Professional, which offers cleaning products and systems for smaller businesses.
In the healthcare and pharmaceutical sector, Ecolab competes with Steris Corporation, a specialist in sterilisation, infection prevention and surgical products in healthcare. Steris serves similar customers to Ecolab, including hospitals, clinics and pharmaceutical manufacturers. Solventum, the former healthcare division of 3M, is also a competitor, particularly with solutions for surface disinfection and infection prevention.
In the pest control sector, Rollins with the Orkin brand and Rentokil Initial are two of the most important competitors. Both companies operate worldwide and offer comprehensive solutions for commercial and private customers. Terminix is another large, unlisted provider. It has a particularly strong presence in the US market and serves both private and commercial customers. However, only Ecolab and Rollis perform well in direct comparison with market capitalisations.
Source: stocksguide chart
However, Ecolab differs from many competitors in the breadth of its product and service portfolio and the close integration of chemical solutions, technical equipment, personal service and digital applications. In particular, the combination of sustainability, efficiency and customer proximity provides a significant competitive advantage. Another characteristic is the deep integration into the customer's operations. Regular on-site support, individual advice and long-term service contracts have created a close bond over the years that makes switching to another provider difficult. Ecolab combines this personal support, with an especially broad product and solution portfolio, to create a deep moat. Customers receive not only individual products, but holistic systems consisting of chemicals, devices, digital tools and accompanying services.
However, competitive strength is also achieved through inorganic growth. Acquisitions are part of the growth strategy. The takeover focus is mostly on small to medium-sized companies that fit strategically and can be well integrated into Ecolab's business model. According to Tracxn, 23 such companies have been acquired in the last twelve years, each with an average value of $1.6 billion. One example is the acquisition of Purolite in 2021 for around $3.7 billion. Purolite is a leading supplier of highly specialised ion exchange resins, which are used primarily in pharmaceutical production, water treatment and biotechnology. The effects of these acquisitions are also reflected in the balance sheet structure. As a result of the numerous acquisitions, intangible assets increased significantly, in particular goodwill, which most recently accounted for 35 per cent of the balance sheet total. The balance sheet swelled accordingly, and liabilities increased.
The last Ecolab quarterly figures of December 2024
In the fourth quarter of 2024, Ecolab posted solid performance overall, with organic growth in almost all business areas. Momentum was particularly strong in the Industrial and Healthcare & Life Sciences segments, but Pest Elimination and Institutional & Specialty also continued to perform well. Regionally, growth was particularly pronounced in the core US market, but the company also grew internationally despite a challenging economic environment by acquiring new customers. Overall, sales increased by 2 percent and net profit by 17 percent.
Source: stocksguide
Profitability thus improved significantly. Earnings per share also rose sharply, reflecting the strong operating performance. In addition, Ecolab generated record free cash flow for the year, indicating a strong financial base and efficient working capital management. Annualised, it amounted to $1.8 billion.
Source: stocksguide
Overall, the quarter confirms Ecolab's robust positioning in a market environment characterised by innovation, customer focus and sustainability. However, Ecolab fell short of the growth momentum seen over the year as a whole. At three per cent, sales growth was slightly higher.
Source: stocksguide
Overall, the quarter confirms Ecolab's robust positioning in a market environment characterised by innovation, customer focus and sustainability. However, Ecolab fell short of the growth momentum seen over the year as a whole. At three per cent, sales growth was slightly higher.
Source: stocksguide charts
Factors such as subdued industrial demand, inflation-related investment restraint or regional differences may have slowed growth in the short term. The fact that analysts expect only moderate growth until 2025 also underlines the fact that Ecolab is currently in a consolidation phase rather than a period of dynamic growth. However, this development should be seen in context: the company is simultaneously investing in future-oriented fields and innovations, which will possibly only be reflected in accelerated sales growth in the medium term. In the short term, however, it is apparent that the operational dynamics are not fully coming to bear.
Ecolab Stock forecast 2025
Ecolab expects a continued positive development for the 2025 financial year. Specifically, the company expects adjusted diluted earnings per share in a range of $7.42 to $7.62 for the full year 2025. Overall, this would correspond to year-on-year growth of 12 to 15 per cent. This forecast already takes into account a negative effect from exchange rate movements, which is expected to impact earnings growth by around four percentage points. On balance, the underlying operating business should therefore grow even faster.
Ecolab is also confident about the first quarter of 2025. Adjusted earnings per share are expected to be between 1.47 and 1.53 US dollars, which corresponds to a growth rate of 10 to 14 percent compared to the same quarter of the previous year. This outlook also takes into account negative currency effects of around four percent.
Overall, the outlook signals solid double-digit earnings growth, driven primarily by organic sales growth, efficiency improvements and targeted pricing. However, the sales growth here probably should not be particularly high. A sales forecast was not initially provided. Nevertheless, despite the challenging macroeconomic environment, Ecolab expects a continuation of the positive development and a further strengthening of operational profitability. In the US, the company's most important market, business is developing very dynamically. But Ecolab is also continuing to grow internationally despite macroeconomic uncertainties. With initiatives such as ‘One Ecolab’ and a targeted focus on high-growth areas such as data centres, microelectronics, life sciences and digital solutions, the company aims to gain further market share. In addition, Christophe Beck, who has been CEO since 2021, announced that the company will also better reflect added value for customers through value-based pricing in the future. Ecolab is excellently positioned strategically and financially and continues to strive for an attractive margin increase – with the clear goal of achieving an operating margin of 20 per cent in the next three years.
Source: stocksguide charts
This is also in line with analysts' long-term sales and earnings forecasts. They have a positive overall view of Ecolab, even if growth will not be equally strong every year. For example, they expect only moderate but steady sales growth in the coming years. Sales of USD 15.7 billion are expected in 2024, which corresponds to a growth rate of 2.8 per cent. In 2025, the expected growth rate is slightly lower at 1.4 per cent, before picking up again significantly in 2026 and 2027 at 5.4 per cent and 5.8 per cent respectively. This development indicates that Ecolab is using its strong market position to tap into new business areas and customer potential in the long term, particularly in high-growth areas such as life sciences and digitalisation.
Source: stocksguide
The development of net profit is even more convincing: after a strong profit jump of over 50 per cent to 2.1 billion US dollars in 2024, analysts expect a continuous increase in profitability in the following years. While EPS growth in 2025 is almost stagnant at just 0.04 per cent, profits are expected to increase significantly again in 2026 and 2027, by 14.3 and 15.7 per cent respectively. This shows that Ecolab can expand its margins while also benefiting from sales growth.
The development of the net margin underlines this trend. It is expected to improve from 13.3 per cent in 2024 to 15.5 per cent in 2027 – a clear indication that the company is becoming increasingly efficient and able to enforce its pricing power on customers. In the long term, Ecolab should therefore not only continue to grow, but also become more and more profitable. The combination of solid sales development and above-average profit growth supports the investment thesis of a high-growth quality company with long-term value creation potential.
Key figures for the Ecolab Stock from the Levermann analysis
The Levermann analysis for Ecolab currently yields a total score of 4 points. According to the strategy definition, this means a slightly positive assessment.
Source: stocksguide
Particularly worthy of mention are the high return on equity of 24 per cent, the solid EBIT margin of 17 per cent and an equity ratio of around 39 per cent, which point to a healthy financial structure and good profitability. The stock price performance of the last twelve months, with a gain of around 11.7 per cent, also has a positive effect on the score. In addition, the stock price reacted to the latest quarterly figures with a rise of over six per cent – a sign that expectations were beaten. The expected profit growth of 14 per cent is also convincing and points to intact growth momentum.
On the other hand, the high valuation is a negative factor. Both the 5-year P/E ratio, which is calculated from the P/E ratios of the last three years and the expected two years and is 40, and the forward P/E ratio of 34 are considered overvalued according to the Levermann model and each leads to point deductions. Further criteria such as analyst opinions, price momentum and earnings revisions do not receive any points.
The Levermann analysis of the Ecolab stock thus ultimately reveals a financially robust and at the same time high-growth company in terms of earnings, which is currently, however, quite highly valued.
Valuation of the Ecolab Stock
The valuation of the Ecolab Stock currently appears ambitious, but reflects the high quality and strong market position of the company. With a price-to-earnings ratio (P/E) of 34 based on the last twelve months, the stock price is well above that of many competitors. Investors are therefore willing to pay a valuation premium for Ecolab's stability, growth opportunities and strong fundamentals. However, this value is visibly below the average from a historical perspective.
Source: stocksguide charts
At the same time, the stable and steadily growing free cash flow of currently 1.8 billion US dollars indicates a solid financial base and a good ability to distribute dividends in the future. The EV/FCF ratio of 43 is also at a very high level, but also in line with the average of recent years.
The situation is similar for the dividend. At 0.9 per cent, the dividend yield is at a relatively low level, which is typical for growth-oriented quality companies that increase their profits in the high single digits to double digits. The dividend history is all the more convincing. Over the past 38 years, the dividend has never been cut. On the contrary, there have been dividend increases without exception.
Source: stocksguide analysts
This means that Ecolab is not a bargain at present. Investors are paying a premium for a company with a solid, globally positioned business model, high market shares and reliable growth. Those who invest for the long term and focus on stability, sustainability and pricing power could still consider this valuation to be justified. In the short term, however, the stock is increasingly susceptible to market corrections.
Conclusion on the Ecolab Stock
Ecolab presents itself as an extremely solid and forward-looking company with a clear focus on sustainable growth, operational excellence and technological innovation. The broad-based business model with several strong segments – including Global Industrial, Institutional & Specialty and Healthcare & Life Sciences – ensures stability and diversification even in a volatile economic environment. In particular, the close integration of product, service and technology solutions creates strong customer loyalty and high barriers to entry for competitors.
The long-term growth prospects are also intact, even if these should only be moderate in terms of sales. However, analysts expect a significant improvement in profit margins in the coming years. Drivers are structural trends such as the increasing demand for water and energy efficiency, the growing relevance of hygiene and health standards, and the increasing digitalisation of Ecolab – for example, through intelligent monitoring tools or data-based process optimisation. Management sees new momentum in particular in high-growth niches such as life sciences, data centres and microelectronics.
Although the stock is highly valued, this reflects the quality, market leadership and stable cash flows of the company. For investors with a long-term focus and an interest in sustainable business models, pricing power and continuous profit growth, Ecolab remains an extremely attractive stock – even if short-term setbacks cannot be ruled out due to the ambitious valuation. Overall, Ecolab is a prime example of a defensive growth stock with a strong moat.
Source:StocksGuide Analyst Forecast
The analysts consider the stock to be a good buy and hold position. Only around four per cent advise selling. The price potential is solid at 16 per cent over a one-year horizon.
The author and/or persons or companies associated with the stocksguide own or may own stocks in Ecolab. This post represents an expression of opinion and not investment advice. Please note the legal information.
