Asset structure analysis
Ecolab’s total assets were $21.8 billion and $21.5 billion in fiscal 2023 and 2022, respectively.
Cash and cash equivalents were $920 million in 2023, making up 4.2% of total assets. This is very small amount.
Total current assets were $5.6 billion in 2023, comprising 25.7% of total assets.
Goodwill was $8.15 billion in 2023, accounting for 37.4% of total assets.
Other intangible assets, net were $3.5 billion in 2023, consisting of 16% of total assets.
The amount of goodwill and other intangible assets is very large, which affect the company’s debt solvency.
Property, plant and equipment, net were $3.47 billion in 2023, making up 16% of total assets.
Liquidity and solvency
Total liabilities were $4.3 billion in 2023.
The current ratio was 1.3.
The liquidity is very good, because the speed of collecting receivables of faster than that of paying suppliers.
Total liabilities were $13.8 billion in 2023.
The debt ratio was 63.3 %, which is not high, but the amount of goodwill and other intangible assets blew up the size of total assets.
Profitability analysis
Ecolab’s revenue was $15.3 billion, $14.2 billion and $12.7 billion in 2023, 2022 and 2021, respectively.
The revenue in 2023 was up 7.7% year on year.
The revenue in 2022 was up 11.8% year on year.
Operating income was $2 billion, $1.56 billion and $1.6 billion in 2023, 2022 and 2021, respectively.
The operating profit margin was 13%, 11% and 12.6 for 2023, 2022 and 2021, respectively.
Net income including noncontrolling interest was $1.4 billion, $1.1 billion and $1.14 billion in 2023, 2022 and 2021, respectively.
Cash flow analysis
Cash provided by operating activities was $2.4 billion, $1.8 billion and $2 billion in 2023, 2022 and 2021, respectively.
The cash flow is good, but free cash flow is more important.
Capital expenditures were $775 million, $713 million and $643 million in 2023, 2022 and 2021, respectively.
The free cash flow was $1.6 billion, $1.1 billion and $1.36 billion in 2023, 2022 and 2021, respectively.
Reacquired shares were $13.7 million, $518.2 million and $106.6 million in 2023, 2022 and 2021, respectively.
Dividends paid were $617.3 million, $602.8 million and $566.4 million in 2023, 2022 and 2021, respectively.
Ecolab’s operating performance for Q1 2024
Net sales were $3.75 billion and $3.57 billion in Q1 2024 and Q1 2023, respectively.
Net sales in Q1 2024 was up 5% year on year.
Net income attributable to Ecolab $412 million and $233.4 million in Q1 2024 and Q1 2023, respectively.
The net income increased by $178.6 million or 76.5% in Q1 2024 YOY as the cost of sales decreased.
Conclusion
Ecolab stock price is $232.92 per share, which is equivalent to $66.52 billion.
We think that the stock price is overvalued, and the reasonable valuation is about $18 billion.
Disclaimer: The content is for reference only and does not constitute investment advice.
Introduction
Ecolab was incorporated as a Delaware corporation in 1924. Our fiscal year is the calendar year ending December 31. International subsidiaries are included in the consolidated financial statements on the basis of their U.S. GAAP (accounting principles generally accepted in the United States of America) November 30 fiscal year ends to facilitate the timely inclusion of such entities in our consolidated financial reporting.
On December 1, 2021, we acquired Purolite for total consideration of $3.7 billion in cash, net of cash acquired. Purolite is a leading and fast-growing global provider of high-end ion exchange resins for the separation and purification of solutions that is highly complementary to our current offering and critical to safe, high quality drug production and biopharma product purification in the life sciences industries. It also provides purification and separation solutions for critical industrial markets like microelectronics, nuclear power and food and beverage. Headquartered in King of Prussia, Pennsylvania, Purolite operates in more than 30 countries. Purolite is reported within our Life Sciences operating segment.
A trusted partner for millions of customers, we are a global sustainability leader offering water, hygiene and infection prevention solutions and services that protect people and the resources vital to life. Building on a century of innovation, we have annual sales of $15 billion, employ more than 48,000 associates and sell to customers in more than 170 countries around the world. We deliver comprehensive science-based solutions, data-driven insights and world-class service to advance food safety, maintain clean and safe environments, and optimize water and energy use. Our innovative solutions improve operational efficiencies and sustainability for customers in the food, healthcare, life sciences, hospitality and industrial markets.
We pursue a “Circle the Customer – Circle the Globe” strategy by providing an array of innovative programs, products and services designed to meet the specific operational and sustainability needs of our customers throughout the world. Through this strategy and our varied product and service mix, one customer may utilize the offerings of several of our operating segments. Important in our business proposition for customers is our ability to produce improved results while reducing their water and energy use. With that in mind, we focus on continually innovating to optimize both our own operations and the solutions we provide to customers, aligning with our corporate strategy to address some of the world’s most pressing and complex sustainability challenges such as water scarcity and climate change. The work we do matters, and the way we do it matters to our employees, customers, investors and the communities in which we and our customers operate.
Sustainability is core to our business strategy. We deliver sustainable solutions that help companies around the world achieve their business goals while reducing environmental impacts. We partner with customers around the world to reduce water and energy use as well as greenhouse gas emissions through our high-efficiency solutions. By partnering with our customers to help them do more with less through the use of our innovative and differentiated solutions, we aim to help our customers conserve more than 300 billion gallons of water annually by 2030. In 2022, we helped our customers conserve more than 219 billion gallons of water and avoid more than 3.6 million metric tons of greenhouse gas emissions.
The following description of our business is based upon our reportable segments as reported in our consolidated financial statements for the year ended December 31, 2023, which are located in Item 8 of Part II of this Form 10-K. Operating segments that share similar economic characteristics and future prospects, including the nature of the products and production processes, end-use markets, channels of distribution and regulatory environment, have been aggregated into three reportable segments: Global Industrial, Global Institutional & Specialty and Global Healthcare & Life Sciences. Operating segments that were not aggregated and do not exceed the quantitative criteria to be separately reported have been combined into Other. We provide similar information for Other as compared to our three reportable segments as we consider the information regarding its underlying operating segments useful in understanding our consolidated results.