By Rob Otman
Ecolab (NYSE: ECL) is a large cap company that operates within the chemicals industry. Its market cap is $39 billion today, and the total one-year return is 11.89% for shareholders.
Ecolab stock is underperforming the market. It’s beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics…
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✗ Earnings-per-Share (EPS) Growth: Ecolab reported a recent EPS growth rate of 11.54%. That’s below the chemicals industry average of 34.65%. That’s not a good sign. We like to see companies that have higher earnings growth.
✗ Price-to-Earnings (P/E): The average price-to-earnings ratio of the chemicals industry is 22.07. And Ecolab’s ratio comes in at 29.78. Its valuation looks expensive compared to many of its competitors.
✗ Debt-to-Equity: The debt-to-equity ratio for Ecolab stock is 109.63%. That’s above the chemicals industry average of 64.75%. That’s not a good sign. Ecolab’s debt levels should be lower.
✗ Free Cash Flow per Share Growth: Ecolab’s FCF has been lower than that of its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.
✗ Profit Margins: The profit margin of Ecolab comes in at 8.02% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Ecolab’s profit margin is below the chemicals average of 13.40%. So that’s a negative indicator for investors.
✗ Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Ecolab is 18.70%, and that’s below its industry average ROE of 23.55%.
Ecolab stock passes zero of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Sell.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
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Source:: Investment You
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