2024-02-20 04:01:57 ET
Summary
- Ecolab has rallied >30% since October of last year and jumped ~7% on earnings.
- Top-line growth has been driven by pricing growth rather than volume growth, indicating that Ecolab's revenue growth is unsustainable.
- In my opinion, investors may not be getting an accurate picture of operating income because certain charges are added back to non-GAAP earnings.
- Investors are pricing in high margins and revenue growth, so there is asymmetric risk/reward to the downside. I estimate that Ecolab is worth ~$180/share using optimistic assumptions.
Introduction
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Ecolab Is An Excellent Business At The Wrong Price