Stock Analysis on Net
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.

Present Value of Free Cash Flow to the Firm (FCFF)

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. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Ecolab Inc., free cash flow to the firm (FCFF) forecast

US$ in thousands, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 11.74%
01 FCFF0 1,587,738
1 FCFF1 1,672,142 = 1,587,738 × (1 + 5.32%) 1,496,393
2 FCFF2 1,776,094 = 1,672,142 × (1 + 6.22%) 1,422,365
3 FCFF3 1,902,506 = 1,776,094 × (1 + 7.12%) 1,363,464
4 FCFF4 2,055,052 = 1,902,506 × (1 + 8.02%) 1,317,992
5 FCFF5 2,238,340 = 2,055,052 × (1 + 8.92%) 1,284,661
5 Terminal value (TV5) 86,270,777 = 2,238,340 × (1 + 8.92%) ÷ (11.74% – 8.92%) 49,513,806
Intrinsic value of Ecolab Inc. capital 56,398,681
Less: Debt (fair value) 9,493,800
Intrinsic value of Ecolab Inc. common stock 46,904,881
 
Intrinsic value of Ecolab Inc. common stock (per share) $163.57
Current share price $180.30

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

1 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.

Weighted Average Cost of Capital (WACC)

Ecolab Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 51,701,301 0.84 13.51%
Debt (fair value) 9,493,800 0.16 2.12% = 2.68% × (1 – 20.80%)

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

1 US$ in thousands

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 286,751,531 × $180.30
= $51,701,301,039.30

   Debt (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (19.10% + 15.20% + 17.00% + 20.80% + 31.90%) ÷ 5
= 20.80%

WACC = 11.74%

FCFF Growth Rate (g)

FCFF 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)
Interest expense 230,600 304,800 215,300 237,200 274,600
Net loss from discontinued operations, net of tax — (2,172,500) — — —
Net income (loss) attributable to Ecolab 1,129,900 (1,205,100) 1,558,900 1,429,100 1,508,400
 
Effective income tax rate (EITR)1 19.10% 15.20% 17.00% 20.80% 31.90%
 
Interest expense, after tax2 186,555 258,470 178,699 187,862 187,003
Add: Cash dividends declared 558,400 541,300 533,100 487,600 439,900
Interest expense (after tax) and dividends 744,955 799,770 711,799 675,462 626,903
 
EBIT(1 – EITR)3 1,316,455 1,225,870 1,737,599 1,616,962 1,695,403
 
Short-term debt 411,000 17,300 380,600 743,600 564,400
Long-term debt, excluding current maturities 8,347,200 6,669,300 5,973,500 6,301,600 6,758,300
Total Ecolab shareholders’ equity 7,224,200 6,166,500 8,685,300 8,003,200 7,618,500
Total capital 15,982,400 12,853,100 15,039,400 15,048,400 14,941,200
Financial Ratios
Retention rate (RR)4 0.43 0.35 0.59 0.58 0.63
Return on invested capital (ROIC)5 8.24% 9.54% 11.55% 10.75% 11.35%
Averages
RR 0.52
ROIC 10.28%
 
FCFF growth rate (g)6 5.32%

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).

1 See details »

2021 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 230,600 × (1 – 19.10%)
= 186,555

3 EBIT(1 – EITR) = Net income (loss) attributable to Ecolab – Net loss from discontinued operations, net of tax + Interest expense, after tax
= 1,129,900 – 0 + 186,555
= 1,316,455

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [1,316,455 – 744,955] ÷ 1,316,455
= 0.43

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 1,316,455 ÷ 15,982,400
= 8.24%

6 g = RR × ROIC
= 0.52 × 10.28%
= 5.32%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (61,195,101 × 11.74% – 1,587,738) ÷ (61,195,101 + 1,587,738)
= 8.92%

where:

Total capital, fair value0 = current fair value of Ecolab Inc. debt and equity (US$ in thousands)
FCFF0 = the last year Ecolab Inc. free cash flow to the firm (US$ in thousands)
WACC = weighted average cost of Ecolab Inc. capital

FCFF growth rate (g) forecast

Ecolab Inc., H-model

Microsoft Excel
Year Value gt
1 g1 5.32%
2 g2 6.22%
3 g3 7.12%
4 g4 8.02%
5 and thereafter g5 8.92%

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

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 5.32% + (8.92% – 5.32%) × (2 – 1) ÷ (5 – 1)
= 6.22%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 5.32% + (8.92% – 5.32%) × (3 – 1) ÷ (5 – 1)
= 7.12%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 5.32% + (8.92% – 5.32%) × (4 – 1) ÷ (5 – 1)
= 8.02%