Stock Analysis on Net

Ecolab Inc. (NYSE:ECL)

$22.49

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

Economic Value Added (EVA)

Microsoft Excel

EVA is registered trademark of Stern Stewart.

Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

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Economic Profit

Ecolab Inc., economic profit calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net operating profit after taxes (NOPAT)1
Cost of capital2
Invested capital3
 
Economic profit4

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 NOPAT. See details »

2 Cost of capital. See details »

3 Invested capital. See details »

4 2021 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= × =


Net Operating Profit After Taxes (NOPAT)
The NOPAT showed an overall increase from 2017 to 2018, reaching a peak of approximately 1,771 million USD. However, it experienced a decline in 2019 and a more significant drop in 2020, falling to about 1,207 million USD. In 2021, there was a recovery, with NOPAT increasing to approximately 1,349 million USD, though it did not return to the 2018 peak level.
Cost of Capital
The cost of capital exhibited a gradual increase from 12.49% in 2017 to a high of 13.28% in 2020. In 2021, there was a slight decrease to 12.72%, indicating a modest reduction in the cost environment or the company’s perceived risk towards the end of the period.
Invested Capital
Invested capital grew steadily from about 17.39 billion USD in 2017 to 18.09 billion USD in 2019. It then declined notably in 2020 to nearly 15.60 billion USD before sharply increasing to approximately 18.43 billion USD in 2021. This fluctuation suggests a possible divestment or asset write-down in 2020 followed by reinvestment or acquisition activities in 2021.
Economic Profit
The economic profit remained negative throughout the period, indicating that the company did not generate returns exceeding its cost of capital. The negative economic profit improved somewhat from -802 million USD in 2017 to -562 million USD in 2018 but then deteriorated again, reaching -656 million USD in 2019. It worsened further in 2020 and 2021, declining to -864 million USD and -996 million USD respectively, suggesting that despite some fluctuations in NOPAT and invested capital, the company increasingly failed to cover its cost of capital over these years.
Overall Insights
The data reflects a mixed performance. While NOPAT recovered somewhat in 2021 after a decline, invested capital experienced volatility with a notable dip in 2020. The steady increase in the cost of capital until 2020 added pressure on profitability. Persistent negative economic profits indicate value destruction, with the situation worsening toward the end of the period, pointing to challenges in generating adequate returns relative to invested capital and associated costs.

Net Operating Profit after Taxes (NOPAT)

Ecolab Inc., NOPAT calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Net income (loss) attributable to Ecolab
Deferred income tax expense (benefit)1
Increase (decrease) in allowance for expected credit losses2
Increase (decrease) in LIFO reserve3
Increase (decrease) in restructuring liability4
Increase (decrease) in equity equivalents5
Interest expense
Interest expense, operating lease liability6
Adjusted interest expense
Tax benefit of interest expense7
Adjusted interest expense, after taxes8
Interest income
Investment income, before taxes
Tax expense (benefit) of investment income9
Investment income, after taxes10
(Income) loss from discontinued operations, net of tax11
Net income (loss) attributable to noncontrolling interest
Net operating profit after taxes (NOPAT)

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 Elimination of deferred tax expense. See details »

2 Addition of increase (decrease) in allowance for expected credit losses.

3 Addition of increase (decrease) in LIFO reserve. See details »

4 Addition of increase (decrease) in restructuring liability.

5 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to Ecolab.

6 2021 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =

7 2021 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =

8 Addition of after taxes interest expense to net income (loss) attributable to Ecolab.

9 2021 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =

10 Elimination of after taxes investment income.

11 Elimination of discontinued operations.


Net Income (Loss) Attributable to Ecolab
The net income attributable to Ecolab exhibited positive values from 2017 through 2019, with a slight decrease in 2018 followed by a recovery in 2019. However, in 2020, there was a significant decline, reflected by a net loss of approximately 1.2 billion US dollars. This downturn was reversed in 2021, where net income returned to a positive figure, measuring around 1.13 billion US dollars, although still below the 2019 peak.
Net Operating Profit After Taxes (NOPAT)
NOPAT showed an overall increasing trend from 2017 to 2019, starting at about 1.37 billion US dollars and peaking at roughly 1.74 billion US dollars in 2019. In 2020, similar to net income, NOPAT experienced a decline but remained positive at about 1.21 billion US dollars. In 2021, there was a moderate recovery, with NOPAT increasing to approximately 1.35 billion US dollars; however, this figure did not reach the 2019 peak level.
Summary of Trends and Insights
The data indicates that the company experienced a strong performance in the initial years up to 2019, with increasing profitability as evidenced by both net income and NOPAT. The year 2020 represents a notable inflection point with a severe reduction in profitability, culminating in a net loss. This suggests that external or internal factors during 2020 heavily impacted earnings. Both metrics improved in 2021, reflecting a recovery phase, but the full return to the profitability levels of 2019 has not yet been realized by the end of that year. The persistence of positive NOPAT through the downturn indicates ongoing operational profitability despite overall net losses in 2020.

Cash Operating Taxes

Ecolab Inc., cash operating taxes calculation

US$ in thousands

Microsoft Excel
12 months ended: Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Provision for income taxes
Less: Deferred income tax expense (benefit)
Add: Tax savings from interest expense
Less: Tax imposed on investment income
Cash operating taxes

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).


The financial data reveals notable fluctuations in the provision for income taxes and cash operating taxes over the five-year period.

Provision for income taxes
This item experienced an overall increase from 242,400 thousand US dollars in 2017 to a peak of 364,300 thousand US dollars in 2018. Subsequently, it decreased to 322,700 thousand US dollars in 2019 and sharply declined further to 176,600 thousand US dollars in 2020. However, it rebounded to 270,200 thousand US dollars in 2021. This pattern indicates volatility with a significant dip in 2020, possibly linked to changes in taxable income or tax regulations, followed by a partial recovery in the final year.
Cash operating taxes
Cash operating taxes presented a different trend characterized by a marked decrease from 692,614 thousand US dollars in 2017 to 329,842 thousand US dollars in 2018. After this drop, values rose to 405,411 thousand US dollars in 2019, followed by another decline to 280,171 thousand US dollars in 2020. There was a moderate increase to 319,507 thousand US dollars in 2021. Overall, the data exhibits considerable volatility with no sustained growth or decline, indicating fluctuating cash tax outflows over the years.

In summary, both provision for income taxes and cash operating taxes show significant variability throughout the period, with notable decreases in 2020 likely tied to the extraordinary circumstances of that year. The partial rebounds in 2021 suggest a normalization trend, although both metrics remain below their initial high points observed in earlier years.


Invested Capital

Ecolab Inc., invested capital calculation (financing approach)

US$ in thousands

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Short-term debt
Long-term debt, excluding current maturities
Operating lease liability1
Total reported debt & leases
Total Ecolab shareholders’ equity
Net deferred tax (assets) liabilities2
Allowance for expected credit losses3
LIFO cost to FIFO cost difference4
Restructuring liability5
Equity equivalents6
Accumulated other comprehensive (income) loss, net of tax7
Noncontrolling interest
Adjusted total Ecolab shareholders’ equity
Construction in progress8
Invested capital

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 Addition of capitalized operating leases.

2 Elimination of deferred taxes from assets and liabilities. See details »

3 Addition of allowance for doubtful accounts receivable.

4 Addition of LIFO reserve. See details »

5 Addition of restructuring liability.

6 Addition of equity equivalents to total Ecolab shareholders’ equity.

7 Removal of accumulated other comprehensive income.

8 Subtraction of construction in progress.


Total Reported Debt & Leases
The total reported debt and leases exhibit a fluctuating pattern over the observed periods. Starting at approximately $7.88 billion in 2017, there is a gradual decline until 2019, reaching about $6.93 billion. This is followed by a slight increase in 2020 to approximately $7.11 billion, and a notable rise in 2021 to roughly $9.16 billion. The large increase in 2021 indicates a significant change in the company's leverage or financing activities.
Total Shareholders' Equity
Shareholders’ equity shows a general upward trend from 2017 to 2019, rising from around $7.62 billion to approximately $8.69 billion. However, in 2020, there is a sharp decrease to about $6.17 billion, followed by a partial recovery in 2021 to approximately $7.22 billion. The drop in 2020 could reflect significant losses, dividend payments, share repurchases, or other equity-reducing activities during that year.
Invested Capital
Invested capital demonstrates an increase from 2017 to 2019, moving from around $17.39 billion to $18.09 billion. In 2020, there is a decline to approximately $15.60 billion, consistent with the reduction in shareholders' equity and the minor increase in debt. By 2021, invested capital rises again to about $18.43 billion, reaching its highest level in the observed timeframe. This trend suggests active adjustments in the capital structure and investment base through the period.

Cost of Capital

Ecolab Inc., cost of capital calculations

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

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

1 US$ in thousands

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2020-12-31).

1 US$ in thousands

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2019-12-31).

1 US$ in thousands

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 21.00%) =
Operating lease liability4 ÷ = × × (1 – 21.00%) =
Total:

Based on: 10-K (reporting date: 2018-12-31).

1 US$ in thousands

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »

Capital (fair value)1 Weights Cost of capital
Equity2 ÷ = × =
Debt3 ÷ = × × (1 – 35.00%) =
Operating lease liability4 ÷ = × × (1 – 35.00%) =
Total:

Based on: 10-K (reporting date: 2017-12-31).

1 US$ in thousands

2 Equity. See details »

3 Debt. See details »

4 Operating lease liability. See details »


Economic Spread Ratio

Ecolab Inc., economic spread ratio calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit1
Invested capital2
Performance Ratio
Economic spread ratio3
Benchmarks
Economic Spread Ratio, Competitors4
Linde plc
Sherwin-Williams Co.

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 Economic profit. See details »

2 Invested capital. See details »

3 2021 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =

4 Click competitor name to see calculations.


The financial data reveals several notable trends over the five-year period.

Economic Profit
The economic profit has been consistently negative across all years presented, indicating that the company has not generated returns above its cost of capital. Although there was an improvement from 2017 to 2018, decreasing the loss from approximately -802 million to -562 million US dollars, the economic profit deteriorated in the subsequent years. The lowest economic profit was observed in 2021, reaching nearly -996 million US dollars, signaling an increasingly larger economic loss over time, especially notable from 2019 onwards.
Invested Capital
Invested capital displayed a general upward trend with some fluctuation. Starting at approximately 17.4 billion US dollars in 2017, it increased each year up to nearly 18.1 billion US dollars by 2019. A decline was observed in 2020, falling to about 15.6 billion US dollars, followed by a rise again in 2021 to approximately 18.4 billion US dollars. The dip in 2020 could be indicative of divestments, asset impairments, or other strategic capital adjustments during that year.
Economic Spread Ratio
The economic spread ratio, reflecting the difference between the return on invested capital and the cost of capital, remained negative throughout the period. Starting at -4.61% in 2017, this ratio improved to -3.15% in 2018, indicating a relative recovery in value creation. However, a decline occurred in 2019, followed by a significant worsening in 2020 to -5.54%. The ratio slightly improved but remained substantially negative at -5.4% in 2021. Such consistent negativity confirms that returns did not cover capital costs, corroborating the pattern observed in economic profit.

Overall, the data points to persistent economic losses despite fluctuations in invested capital. The company has struggled to generate returns above its cost of capital, with particularly challenging years beginning in 2019 and extending through 2021. The drop in invested capital in 2020 followed by a rebound in 2021 may reflect strategic responses to operational or market challenges during that time frame. Continuous negative economic spreads suggest the need for ongoing assessment of capital allocation and operational efficiency to improve profitability and value generation.


Economic Profit Margin

Ecolab Inc., economic profit margin calculation, comparison to benchmarks

Microsoft Excel
Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in thousands)
Economic profit1
Net sales
Performance Ratio
Economic profit margin2
Benchmarks
Economic Profit Margin, Competitors3
Linde plc
Sherwin-Williams Co.

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 Economic profit. See details »

2 2021 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × ÷ =

3 Click competitor name to see calculations.


Economic Profit Trend
The economic profit has been consistently negative throughout the five-year period, indicating that the company has not generated excess returns above its cost of capital. The economic profit value shows a decline from -802,044 thousand US dollars in 2017 to -996,035 thousand US dollars in 2021. This deterioration suggests increasing economic losses over time, with a notable dip observed in 2020 and 2021.
Net Sales Trend
Net sales increased steadily from 13,838,300 thousand US dollars in 2017 to a peak of 14,906,300 thousand US dollars in 2019. However, there was a significant decline in 2020 to 11,790,200 thousand US dollars, which may indicate the impact of external factors affecting sales, such as economic downturns or market disruptions. In 2021, net sales partially recovered to 12,733,100 thousand US dollars but remained below the pre-2020 levels.
Economic Profit Margin Analysis
The economic profit margin remained negative across all periods, reflecting that the company’s operations did not generate returns exceeding its cost of capital. The margin improved slightly from -5.8% in 2017 to -3.83% in 2018, followed by a deterioration to -7.82% by 2021. The worsening margin in the latter years corresponds with declining economic profit and supports the observation of increasing economic loss relative to sales.
Overall Interpretation
Despite periods of revenue growth, the company consistently experienced negative economic profit and economic profit margin, with the situation worsening particularly in 2020 and 2021. The drop in net sales in 2020 had a correlated negative impact on profitability metrics, while the incomplete recovery in 2021 sales has not been sufficient to reverse the trend of diminishing economic profit. This pattern signals challenges in achieving profitable operations relative to the company’s cost of capital over the analyzed timeframe.