Stock Analysis on Net

Ecolab Inc. (NYSE:ECL)

This company has been moved to the archive! The financial data has not been updated since February 25, 2022.

Dividend Discount Model (DDM)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.


Intrinsic Stock Value (Valuation Summary)

Ecolab Inc., dividends per share (DPS) forecast

US$

Microsoft Excel
Year Value DPSt or Terminal value (TVt) Calculation Present value at 13.64%
0 DPS01 1.95
1 DPS1 2.17 = 1.95 × (1 + 11.49%) 1.91
2 DPS2 2.43 = 2.17 × (1 + 11.73%) 1.88
3 DPS3 2.72 = 2.43 × (1 + 11.96%) 1.85
4 DPS4 3.05 = 2.72 × (1 + 12.19%) 1.83
5 DPS5 3.43 = 3.05 × (1 + 12.43%) 1.81
5 Terminal value (TV5) 317.17 = 3.43 × (1 + 12.43%) ÷ (13.64%12.43%) 167.33
Intrinsic value of Ecolab Inc. common stock (per share) $176.62
Current share price $180.30

Based on: 10-K (reporting date: 2021-12-31).

1 DPS0 = Sum of the last year dividends per share of Ecolab Inc. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

Microsoft Excel
Assumptions
Rate of return on LT Treasury Composite1 RF 4.43%
Expected rate of return on market portfolio2 E(RM) 13.60%
Systematic risk of Ecolab Inc. common stock βECL 1.00
 
Required rate of return on Ecolab Inc. common stock3 rECL 13.64%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rECL = RF + βECL [E(RM) – RF]
= 4.43% + 1.00 [13.60%4.43%]
= 13.64%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Ecolab Inc., PRAT model

Microsoft Excel
Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in thousands)
Cash dividends declared 558,400 541,300 533,100 487,600 439,900
Net income (loss) attributable to Ecolab 1,129,900 (1,205,100) 1,558,900 1,429,100 1,508,400
Net sales 12,733,100 11,790,200 14,906,300 14,668,200 13,838,300
Total assets 21,206,400 18,126,000 20,869,100 20,074,500 19,962,400
Total Ecolab shareholders’ equity 7,224,200 6,166,500 8,685,300 8,003,200 7,618,500
Financial Ratios
Retention rate1 0.51 0.66 0.66 0.71
Profit margin2 8.87% -10.22% 10.46% 9.74% 10.90%
Asset turnover3 0.60 0.65 0.71 0.73 0.69
Financial leverage4 2.94 2.94 2.40 2.51 2.62
Averages
Retention rate 0.63
Profit margin 9.99%
Asset turnover 0.68
Financial leverage 2.68
 
Dividend growth rate (g)5 11.49%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

1 Retention rate = (Net income (loss) attributable to Ecolab – Cash dividends declared) ÷ Net income (loss) attributable to Ecolab
= (1,129,900558,400) ÷ 1,129,900
= 0.51

2 Profit margin = 100 × Net income (loss) attributable to Ecolab ÷ Net sales
= 100 × 1,129,900 ÷ 12,733,100
= 8.87%

3 Asset turnover = Net sales ÷ Total assets
= 12,733,100 ÷ 21,206,400
= 0.60

4 Financial leverage = Total assets ÷ Total Ecolab shareholders’ equity
= 21,206,400 ÷ 7,224,200
= 2.94

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.63 × 9.99% × 0.68 × 2.68
= 11.49%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($180.30 × 13.64%$1.95) ÷ ($180.30 + $1.95)
= 12.43%

where:
P0 = current price of share of Ecolab Inc. common stock
D0 = the last year dividends per share of Ecolab Inc. common stock
r = required rate of return on Ecolab Inc. common stock


Dividend growth rate (g) forecast

Ecolab Inc., H-model

Microsoft Excel
Year Value gt
1 g1 11.49%
2 g2 11.73%
3 g3 11.96%
4 g4 12.19%
5 and thereafter g5 12.43%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 11.49% + (12.43%11.49%) × (2 – 1) ÷ (5 – 1)
= 11.73%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 11.49% + (12.43%11.49%) × (3 – 1) ÷ (5 – 1)
= 11.96%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 11.49% + (12.43%11.49%) × (4 – 1) ÷ (5 – 1)
= 12.19%