Let's talk about the popular Ecolab Inc. (NYSE:ECL). The company's shares maintained its current share price over the past couple of month on the NYSE, with a relatively tight range of US$242 to US$261. However, does this price actually reflect the true value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Ecolab's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's The Opportunity In Ecolab?
The stock seems fairly valued at the moment according to our valuation model. It's trading around 11% below our intrinsic value, which means if you buy Ecolab today, you'd be paying a fair price for it. And if you believe the company's true value is $274.73, then there isn't much room for the share price grow beyond what it's currently trading. So, is there another chance to buy low in the future? Given that Ecolab's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will Ecolab generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Ecolab's earnings over the next few years are expected to increase by 28%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? ECL's optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you've been keeping an eye on ECL, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it's worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
If you want to dive deeper into Ecolab, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 1 warning sign for Ecolab you should know about.
If you are no longer interested in Ecolab, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
