Analysis of Long-term (Investment) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Long-term Activity Ratios (Summary)
Ecolab Inc., long-term (investment) activity ratios
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 analysis of long-term activity ratios indicates a period of stability in fixed asset productivity contrasted by a gradual decline in overall asset utilization efficiency from 2017 through 2021.
- Net Fixed Asset Turnover
- The ratio of net fixed assets to sales remained remarkably stable, fluctuating within a narrow range between 3.73 and 3.87. A slight upward trend is observed by the end of the period, peaking at 3.87 in 2021, which suggests a consistent ability to generate revenue from the company's physical infrastructure.
- Net Fixed Asset Turnover (Including Operating Lease Right-of-Use Assets)
- A divergence is noted starting in 2019, where the ratio dropped from 3.82 to 3.29. While it recovered slightly to 3.46 by 2021, it remained consistently lower than the standard net fixed asset turnover. This gap indicates that the inclusion of right-of-use assets expanded the asset base, thereby reducing the turnover efficiency relative to traditional fixed assets.
- Total Asset Turnover
- A clear downward trend is observed in total asset turnover, which declined from a peak of 0.73 in 2018 to 0.60 in 2021. This contraction suggests that the growth in the total asset base has outpaced the growth in revenue, indicating a decrease in the overall efficiency of asset utilization to drive top-line growth.
- Equity Turnover
- Equity turnover exhibited volatility throughout the period, ranging from a low of 1.72 in 2019 to a high of 1.91 in 2020. Despite these fluctuations, the ratio ended the period at 1.76, remaining relatively close to the 2017 starting point of 1.82, suggesting that the efficiency of utilizing shareholder equity to generate sales has remained broadly consistent.
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Net Fixed Asset Turnover
Ecolab Inc., net fixed asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 12,733,100) | 11,790,200) | 14,906,300) | 14,668,200) | 13,838,300) | |
| Property, plant and equipment, net | 3,288,500) | 3,124,900) | 3,954,900) | 3,836,000) | 3,707,100) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover1 | 3.87 | 3.77 | 3.77 | 3.82 | 3.73 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover, Competitors2 | ||||||
| Linde plc | 1.18 | — | — | — | — | |
| Sherwin-Williams Co. | 10.68 | — | — | — | — | |
| Net Fixed Asset Turnover, Sector | ||||||
| Chemicals | 1.81 | — | — | — | — | |
| Net Fixed Asset Turnover, Industry | ||||||
| Materials | 1.27 | — | — | — | — | |
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 2021 Calculation
Net fixed asset turnover = Net sales ÷ Property, plant and equipment, net
= 12,733,100 ÷ 3,288,500 = 3.87
2 Click competitor name to see calculations.
An analysis of long-term investment activity reveals a consistent level of operational efficiency regarding the utilization of fixed assets to generate revenue. Despite significant fluctuations in both top-line sales and the net value of property, plant, and equipment between 2017 and 2021, the net fixed asset turnover ratio remained remarkably stable.
- Revenue Performance
- Net sales experienced a growth trend from 2017 through 2019, peaking at US$ 14.9 billion. A significant contraction occurred in 2020, with sales falling to US$ 11.8 billion, followed by a partial recovery to US$ 12.7 billion in 2021.
- Fixed Asset Management
- The net value of property, plant, and equipment increased steadily until 2019. A notable decline was observed in 2020, where the asset base dropped to US$ 3.1 billion, followed by a slight increase to US$ 3.3 billion in 2021.
- Net Fixed Asset Turnover Analysis
- The turnover ratio exhibited minimal variance over the five-year period, ranging from 3.73 in 2017 to 3.87 in 2021. The stability of this ratio, particularly during the 2020 downturn, suggests that the reduction in the fixed asset base was proportional to the decline in sales. The peak ratio of 3.87 in 2021 indicates the highest level of asset productivity within the analyzed timeframe.
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Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Ecolab Inc., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 12,733,100) | 11,790,200) | 14,906,300) | 14,668,200) | 13,838,300) | |
| Property, plant and equipment, net | 3,288,500) | 3,124,900) | 3,954,900) | 3,836,000) | 3,707,100) | |
| Operating lease assets | 396,800) | 423,800) | 577,500) | —) | —) | |
| Property, plant and equipment, net (including operating lease, right-of-use asset) | 3,685,300) | 3,548,700) | 4,532,400) | 3,836,000) | 3,707,100) | |
| Long-term Activity Ratio | ||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 3.46 | 3.32 | 3.29 | 3.82 | 3.73 | |
| Benchmarks | ||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | ||||||
| Linde plc | 1.14 | — | — | — | — | |
| Sherwin-Williams Co. | 5.41 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | ||||||
| Chemicals | 1.65 | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | ||||||
| Materials | 1.21 | — | — | — | — | |
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 2021 Calculation
Net fixed asset turnover (including operating lease, right-of-use asset) = Net sales ÷ Property, plant and equipment, net (including operating lease, right-of-use asset)
= 12,733,100 ÷ 3,685,300 = 3.46
2 Click competitor name to see calculations.
The analysis of long-term investment activity reveals a period of volatility in both revenue generation and asset utilization between 2017 and 2021. Net sales experienced growth through 2019, peaking at approximately 14.9 billion US$, followed by a significant contraction in 2020 to 11.8 billion US$, and a partial recovery to 12.7 billion US$ by the end of 2021.
- Net Fixed Asset Turnover Trend
- The net fixed asset turnover ratio reached a peak of 3.82 in 2018, indicating the highest level of efficiency in generating sales relative to the investment in property, plant, and equipment. This efficiency declined to 3.29 in 2019, coinciding with a substantial increase in the net fixed asset base. A gradual recovery in asset productivity followed, with the ratio improving to 3.32 in 2020 and further increasing to 3.46 in 2021.
- Fixed Asset Base Fluctuations
- The investment in property, plant, and equipment, including right-of-use assets, showed a notable increase in 2019, rising to 4.5 billion US$. This expansion of the asset base contributed to the temporary dip in the turnover ratio. However, a sharp reduction in net fixed assets occurred in 2020, dropping to 3.5 billion US$, which suggests either significant asset disposals, accelerated depreciation, or a restructuring of lease obligations.
- Correlation Between Revenue and Asset Utilization
- A divergence is observed between 2018 and 2019, where assets grew at a faster rate than sales, resulting in reduced turnover efficiency. Conversely, during the revenue downturn of 2020, the simultaneous reduction in the net fixed asset base prevented a further collapse of the turnover ratio, maintaining it at 3.32. The recovery in 2021 was driven by a rebound in net sales that outpaced the modest increase in fixed assets, leading to an improved turnover ratio of 3.46.
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Total Asset Turnover
Ecolab Inc., total asset turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| 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) | |
| Long-term Activity Ratio | ||||||
| Total asset turnover1 | 0.60 | 0.65 | 0.71 | 0.73 | 0.69 | |
| Benchmarks | ||||||
| Total Asset Turnover, Competitors2 | ||||||
| Linde plc | 0.38 | — | — | — | — | |
| Sherwin-Williams Co. | 0.97 | — | — | — | — | |
| Total Asset Turnover, Sector | ||||||
| Chemicals | 0.50 | — | — | — | — | |
| Total Asset Turnover, Industry | ||||||
| Materials | 0.49 | — | — | — | — | |
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).
1 2021 Calculation
Total asset turnover = Net sales ÷ Total assets
= 12,733,100 ÷ 21,206,400 = 0.60
2 Click competitor name to see calculations.
Analysis of the five-year period reveals a fluctuating relationship between revenue generation and asset utilization, characterized by a general decline in operational efficiency regarding asset productivity during the latter half of the period.
- Net Sales Performance
- Revenue exhibited an upward trajectory from 2017 to 2019, peaking at 14.9 billion US dollars. A significant contraction occurred in 2020, where sales dropped to 11.8 billion US dollars, followed by a partial recovery to 12.7 billion US dollars in 2021. Despite the recovery in the final year, net sales remained below the levels recorded between 2017 and 2019.
- Total Asset Trends
- The asset base remained relatively stable between 2017 and 2019, hovering around 20 billion US dollars. A notable reduction in total assets was observed in 2020, falling to 18.1 billion US dollars. However, by 2021, assets expanded to a five-year peak of 21.2 billion US dollars, indicating a significant increase in the company's investment in its resource base.
- Total Asset Turnover Analysis
- The total asset turnover ratio peaked at 0.73 in 2018, representing the highest level of asset efficiency within the analyzed period. From 2019 onward, a consistent downward trend is observed, with the ratio falling to 0.65 in 2020 and further declining to 0.60 in 2021. This decline indicates that the company is generating less revenue for every dollar of assets held. The most pronounced inefficiency occurred in 2021, as the substantial increase in total assets was not matched by a proportional recovery in net sales, leading to the lowest turnover ratio in the five-year sequence.
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Equity Turnover
Ecolab Inc., equity turnover calculation, comparison to benchmarks
| Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | Dec 31, 2017 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | 12,733,100) | 11,790,200) | 14,906,300) | 14,668,200) | 13,838,300) | |
| Total Ecolab shareholders’ equity | 7,224,200) | 6,166,500) | 8,685,300) | 8,003,200) | 7,618,500) | |
| Long-term Activity Ratio | ||||||
| Equity turnover1 | 1.76 | 1.91 | 1.72 | 1.83 | 1.82 | |
| Benchmarks | ||||||
| Equity Turnover, Competitors2 | ||||||
| Linde plc | 0.70 | — | — | — | — | |
| Sherwin-Williams Co. | 8.18 | — | — | — | — | |
| Equity Turnover, Sector | ||||||
| Chemicals | 1.09 | — | — | — | — | |
| Equity Turnover, Industry | ||||||
| Materials | 1.22 | — | — | — | — | |
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 2021 Calculation
Equity turnover = Net sales ÷ Total Ecolab shareholders’ equity
= 12,733,100 ÷ 7,224,200 = 1.76
2 Click competitor name to see calculations.
Between 2017 and 2021, the company experienced a period of growth followed by a significant contraction in 2020 and a subsequent partial recovery. Both net sales and total shareholders' equity reached their peak in 2019 before facing a sharp decline in 2020. Despite these volatility factors, the equity turnover ratio remained within a narrow band, indicating a relatively consistent relationship between the equity base and revenue generation.
- Net Sales Performance
- Revenue showed a steady upward trajectory from 2017 to 2019, increasing from 13.8 billion USD to a peak of 14.9 billion USD. A substantial decline occurred in 2020, with sales dropping to 11.8 billion USD. By 2021, a recovery phase began, bringing net sales back up to 12.7 billion USD, although this remained below the levels recorded in the three years prior to 2020.
- Shareholders' Equity Dynamics
- Total shareholders' equity followed a similar trend to net sales, growing from 7.6 billion USD in 2017 to a peak of 8.7 billion USD in 2019. A sharp reduction was observed in 2020, where equity fell to 6.2 billion USD. The equity base recovered to 7.2 billion USD by the end of 2021, reflecting a rebuilding of the capital base after the 2020 contraction.
- Equity Turnover Analysis
- The equity turnover ratio fluctuated between 1.72 and 1.91 over the five-year period. An inverse relationship is observed in 2020; despite the drop in net sales, the equity turnover ratio reached its five-year peak of 1.91. This indicates that the reduction in shareholders' equity was more pronounced than the decline in revenue during that year. Conversely, in 2019, the ratio dipped to 1.72 as equity growth outpaced the growth in sales. By 2021, the ratio settled at 1.76 as the recovery in equity slightly exceeded the recovery in sales.
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