QS Research · Michael Burry's Scion Capital analyst template · 2006
ECOLAB INC. (ECL)
As of 2026-11-11 · 12/15 boxes filled from SEC filings and market data
Report price $306.03 (close 2026-11-10)
Conclusion: PASS
Conviction low · base case -28% · downside -28% · upside +7%
Ecolab is a genuinely good franchise - ROIC 9.9% against a 6.0% WACC (N45, N46) and a service-led moat - but the price already capitalizes it: 41.2x TTM P/E (36.7x on operating, tax-normalized earnings), 24.7x EV/EBITDA on GAAP EBITDA and a 2.1% FCF yield (N31, N37, N28, N32) against a peer-median 29.45x P/E that puts the equity near $219 (N57). The base case is the peer-median 29.45x P/E against today's 41.2x, on TTM net income of $2.08B, about -28.5%; the downside takes earnings down 5% (CoolIT/Ovivo financing drag, $70M higher quarterly net interest, $334M restructuring) and compresses the multiple to 28.35x, halfway from today's 36.7x operating P/E to the market anchor and at least 15% below today's, also about -28.5%; the upside is only the top-of-peer-range P/E, about +7%, near $327. Reward against risk is 0.25: the upside is small next to a base and a downside that both sit about 28.5% lower. Growth is the only lever - +17% EBITDA is needed for +20% at today's multiple (S1, N14) - and FY2025 revenue grew just 2.2% (N41) while buybacks plus dividends of $1.90B exceed $1.80B of FCF (N19, N20, N18). The market is missing that the premium is not supported by disclosed growth or cash yield; the call is a pass on low conviction, with the 2027 margin target the main risk to it.
Key numbers
- Share price: $306.03
- Market cap: $85.83B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $17.37B
- EV / EBITDA (TTM): 24.7x
- P/E (TTM): 41.2x
- FCF yield: 2.1%
- Price / book: 8.23x
- P/E, operating (tax-normalized) (TTM): 36.7x
- EV / FCF (TTM): 54.8x
- Revenue growth (latest fiscal year): +2.2%
- ROIC (TTM): 9.9%
- WACC: 6.0%
- Economic profit spread: +3.9 pts
The 15 boxes
- ✓ 1. Long-form business notes
Ecolab sells water-treatment, cleaning/sanitizing and infection-prevention programs — mostly product and leased equipment recognized at a point in time, with services over time in Pest Elimination — to food, healthcare, hospitality, industrial, data-center and life-science customers in more than 170 countries, supported by 48,000 associates (Dec 31, 2025) and largely direct field sales. Between the FY2020 10-K and the FY2025 10-K the reporting structure changed from three segments plus Other (after the June 2020 ChampionX split-off) to four segments: Global Water, Global Institutional & Specialty, Global Pest Elimination and Global Life Sciences. Scale grew from $11.8B of 2020 sales to $16.08B FY2025 and $17.37B TTM to Sep 2026, with operating income of $2.74B in FY2025 and $2.90B TTM and operating cash flow of $2.95B and $3.03B respectively. Capital is being put into capex ($1.05B FY2025, $1.23B TTM) and buybacks ($783.8M FY2025, $1.08B TTM), with diluted shares down to 282.60M TTM from 290.30M in FY2020.
- ✓ 2. Competitive advantage
Ecolab’s 10-K describes a scale-and-service competitive model: Global Water markets are led by a few large companies, products are sold mainly through Company-trained direct field sales personnel, and the company had more than 25,000 sales and service employees and about 3,000 technical experts as of December 31, 2025. Customer concentration is low—no customer or distributor was 10% or more of consolidated revenues in 2025, 2024 or 2023—though warewashing was about 13% of 2025 consolidated net sales. The financial record shows operating income of $1.40B in FY2020, $2.74B in FY2025 and $2.90B TTM to 2026-09-30 on revenue of $11.79B, $16.08B and $17.37B. The sources do not quantify market share, gross margin or ROIC, and they list numerous competitors plus customer-consolidation and pricing-flexibility risks.
- ✓ 3. 10-Q takeaways
Q3 2026 was a growth quarter: reported sales rose 13% to $4,694.8M and organic sales rose 7% on 2% volume and 5% pricing. Reported gross margin fell to 44.1% from 44.8%, while organic gross margin was stable at 44.9%; adjusted operating income rose 14% and adjusted diluted EPS rose 5% to $2.18. Reported net income and EPS were lower, with Q3 2026 special charges of $82.9M, and the release guides 2026 adjusted diluted EPS to $8.10-$8.20 and Q4 2026 to $2.13-$2.23. Cash was $722.3M at Sep 30 2026, debt rose with acquisitions, and first-nine-month 2026 buybacks were $672M.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
Sign in with a QuantSignals Premium or Gold plan to read every box: each point linked to the SEC filing it came from, the bull and bear case, and the comparables. QS Research powers the signals behind FST, our autonomous trading agent.