ECOLAB INC. (ECL): what the price requires

At today's price, ECOLAB INC. (ECL) is priced for today's economics sustained for ~5.5 years. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/ECL

Headline

FieldValue
TickerECL
CompanyECOLAB INC.
Current price$271.26/sh
CompositionProduct and equipment sales 78% / Service and lease sales 22%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basiswhole-company
Operating margin needed21.4%
Operating margin today16.6%
Margin expansion implied+4.8pp
Must persist for5.5y
Multiple paid32x operating income

The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.

Solve inputs: computed at a 8.7% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~1.9 years.

How unusual the bet is: elevated

ReferenceValue
vs own history+1.12σ
cohort percentile (of 69 peers)80
sustained it ~5.5 years at this level35%
implied end-window share0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore requires assumptions beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset3.38x5expensive
Earnings4.05x5expensive
Relative2.34x5expensive
Growth1.42x3expensive

Families that call it expensive: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.1%); the inversion above states its own rate.

Per-Model Detail (n=18)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth$117.172.32xyesFCF base $1.9B, growth 5% (input: historical growth), terminal g 4.0%, WACC 9.1%, 6yr projection
DCF Exit MultipleGrowth$212.561.28xyesExit EV/EBITDA: 24.2x / 26.2x / 28.2x (bear / base = today's held flat / bull), 6yr
Relative ValuationRelative$193.421.40xyesP/E 26.36x (blended: static sector reference 22x + trailing (TTM) 37x), scenarios: 22.1x / 26.4x / 30.7x (bear / base = reference held flat / bull), EV/EBITDA 17.66x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$80.243.38xyesBV/sh $35.26, ROE (TTM) 21.0%, ke 9.3%
Two-Stage Excess ReturnAsset$120.072.26xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$191.401.42xyesRev $16.5B, growth 5% (input: historical growth; tapered), Terminal P/S: 3.9x / 4.7x / 5.4x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$88.683.06xyesEPS $7.39, growth 4% (input: historical EPS growth), PEG=10.34 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings$57.584.71xyesNormalized EBIT (5y avg op income, one-time charges added back) $2.20B × (1−22%) / WACC 9.1% → EPV (no growth)
Residual IncomeAsset$114.372.37xyesBV $35.26 + 5yr PV of (ROE (TTM) 21.0% − Kₑ 9.3%) × BV; BV grows 8.8%/yr
Graham NumberAsset$76.573.54xyes√(22.5 × EPS $7.39 × BVPS $35.26) — Graham's conservative floor
EV/EBITDA RelativeRelative$142.991.90xyesEBITDA $2.98B × sector EV/EBITDA 14.0x
FCF YieldEarnings$66.964.05xyesFCF $1870.2M / Kₑ 9.3% — zero-growth perpetuity
SBC-Adj FCF YieldEarnings$61.834.39xyesSBC-adj FCF $1.74B (FCF $1.87B − SBC $0.13B) capitalized at Kₑ
Ben Graham FormulaEarnings$96.432.81xyesEPS $7.39 × (8.5 + 2×3.5%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset$16.7616.18xyesBV $35.26 × (ROIC 4.3% / WACC 9.1%)
P/Sales SectorRelative$115.982.34xyesRevenue $16.45B × sector P/S 2.0x
PEG Fair ValueRelative$39.186.92xyesEPS $7.39 × (PEG 1.5 × growth 3.5% (input: historical EPS growth)) → PE 5.3x
Earnings YieldEarnings$79.893.40xyesEPS $7.39 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Net debt$9.2b
Net debt / NOPAT (after-tax)4.46x
Net debt / operating income (pre-tax)3.49x
Interest coverage8.8x
Share count CAGR (buyback)-0.4%
Burning cashno

Bullet Takeaways

At $269 every standard valuation family lands below the price (asset near $80 to $120, earnings-power near $58 to $67, relative near $116 to $193), so the quote rests on a durability and pricing-power premium rather than on any single method reaching it.

The inversion reads about 32x company-wide operating income, implying roughly mid-single-digit growth with margin expansion held for about six years; the implied operating margin near 19.3% matches management's own 2026 guide of over 19%, so the bet is on duration, not on an implausible next step.

The caution is the peak multiple and the base rate: the multiple sits at the very top of the peer distribution, only about 34% of comparable fast-growers sustained this pace historically, and with first-quarter volume growth of just 1% the story leans almost entirely on continued pricing.

Bull Case

Look at where the price lands against the valuation methods and the pattern is unusual: at $269 (June 27, 2026) every standard family sits below the quote, from the asset-based excess-return models near $80 to $120, to the earnings-power frames near $58 to $67, to the relative-multiple reads near $116 to $193. When a stock trades above all of them, the market is paying for something the static frames cannot see, and for Ecolab that something is a durability and pricing-power premium that has held for decades. The bet the price embeds is modest in rate and long in time: roughly mid-single-digit operating growth with margin expansion, sustained for about six years. The near-term pace is well within what Ecolab has recently delivered; the stretch is duration, not heroics.

The business earns that premium because it sells outcomes, not chemicals. Ecolab partners with industrial and institutional customers to help them, in its own words, do more with less through innovative and differentiated solutions (FY2025 10-K, accession 0001104659-26-018357), and that embedded, on-site service model creates switching costs a commodity supplier never has. The first quarter of 2026 showed the engine working: organic sales up 4% (3% value pricing, 1% volume) and organic operating margin up 70 basis points to 16.8%, with adjusted EPS up 13%. Pricing of 3% with only 1% volume is the signature of a business that raises price because the customer values the service, not because input costs forced it.

The forward math is what justifies paying up. Management guides 2026 operating margin to expand 100 to 150 basis points to over 19%, driving 14% to 16% operating-income growth and 12% to 15% adjusted EPS growth. That margin trajectory is exactly what the inversion reads as priced in (an implied margin near 19.3% against a current 17%), so the market and management are aligned on the same path. Return on equity near 21%, interest coverage near 9x, and a share count that has been flat to slightly shrinking mean the compounding accrues to shareholders. For a quality compounder, the question is rarely whether the next year works; it is whether the moat keeps the margin expanding, and Ecolab's history says it usually does.

Bear Case

Start with the qualitative disconnect, then let the numbers confirm it. Ecolab is a genuinely excellent business, but excellence and a fair price are different things, and here the price has run ahead of even a generous read of the franchise. The market pays about 32x company-wide operating income, a multiple the engine flags as sitting at the very top of the peer distribution, well beyond the upper quartile. Paying a peak multiple for a mature, mid-single-digit-growth compounder leaves no room for the kind of disappointment that periodically visits even great companies, and it means the return from here depends heavily on the multiple not compressing.

The ratios show how much of the price is multiple rather than earning power. The earnings-power value model, which asks what the business is worth on normalized current earnings without growth, lands near $58. The free-cash-flow capitalization marks around $67, and even the relative P/E frame at a rich 26x blended multiple only reaches about $193. The ROIC-justified book model is the bluntest: with return on invested capital around 4.3% against a roughly 9% cost of capital on the full invested base, that frame marks the stock near $17. The gap between a 21% ROE and a 4.3% ROIC points to a balance sheet carrying meaningful acquisition goodwill and debt (net debt is about 3.3x operating income), which makes the equity return look better than the underlying capital efficiency.

The forward bet has a real base-rate problem and live operational risks. Only about 34% of comparable fast-growers have sustained the priced-in pace over a roughly six-year horizon, so history says the durable-compounding outcome is the minority case even for good companies. The first quarter's volume growth was just 1%, so the story leans almost entirely on continued pricing, and pricing power can fade if customers push back or raw-material deflation removes the cover. The 10-K also flags technology and cybersecurity exposure, noting customer offerings include digital components such as remote monitoring and that a breach of those systems is a risk, alongside no assurance it meets its technology-development goals (FY2025 10-K, accession 0001104659-26-018357). At this multiple, a single soft year or a multiple re-rate toward the methods is enough to produce a poor return even with the business intact.

Valuation

The defining feature of Ecolab's valuation is that no family of methods reaches the price. The asset-based frames cluster from about $80 (simple excess return) to $120 (two-stage excess return). The earnings-power frames sit lower, near $58 (earnings power value) to $67 (free-cash-flow yield). The relative-multiple frames range from about $116 (sector P/S) to $193 (relative P/E at a rich 26x blend). The growth-DCF frames are the closest, with the exit-multiple DCF near $211 and the discounted-future-market-cap model near $190, but even those generally land below the $269 quote. The X-ray pattern is unambiguous: the price is a bet beyond what any standard frame supports.

Inverting the price clarifies the bet rather than condemning it. At $269 the market pays about 32x company-wide operating income, which the engine reads as roughly self-funding-ceiling growth held for about six years at an 8.8% cost of capital. The implied operating margin near 19.3% sits just above the current 17%, and that is exactly the margin path management guides to (over 19% by year-end 2026). So the priced-in assumption is internally coherent with guidance; the question is durability, not plausibility of the next step.

How unusual is it? Against Ecolab's own history the near-term pace is within range. Against the sector the multiple sits at the very top of the peer distribution. Against the broad base rate, only about 34% of comparable fast-growers sustained this kind of run over the horizon. The honest read is that Ecolab is a high-quality franchise priced for its quality to persist, with the durability premium, not the underlying numbers, doing the work of justifying $269.

Catalysts

The most recent print was the late-April 2026 first-quarter report, and it landed at the midpoint of guidance. Organic sales grew 4% (3% value pricing, 1% volume), organic operating income margin expanded 70 basis points to 16.8%, and adjusted diluted EPS grew 13%. Reported revenue reached about $4.07 billion, up roughly 10% year over year. Management reaffirmed full-year targets rather than raising them.

The forward guidance is the anchor for the thesis. For full-year 2026, Ecolab expects reported sales up 7% to 9%, organic sales up 3% to 4%, operating income margin to expand 100 to 150 basis points to over 19% (driving 14% to 16% operating-income growth), and adjusted EPS growth of 12% to 15%. The watch item at each quarterly print is the margin trajectory: the entire premium rests on margin reaching the guided 19%-plus, so any slippage there matters more than a revenue wobble.

The leverage points over the next several quarters are pricing durability and volume. With volume growth at only 1%, continued 3% value pricing is carrying organic growth, so the question is whether customers keep accepting price increases as raw-material costs normalize. Watch the split between pricing and volume in each release, the cadence of digital and growth-initiative scaling that management credits for margin gains, and any change in end-market demand across industrial and institutional customers. A quarter where volume reaccelerates would strengthen the durable-compounding case; a quarter where pricing fades without volume to replace it would undercut it.

Sources: Ecolab Q1 2026 earnings call transcript (Motley Fool, AOL, Globe and Mail); Ecolab Q1 2026 slides (Investing.com); Ecolab Q1 2026 revenue recap (Alphastreet); Ecolab Q1 2026 highlights (Yahoo Finance).

Peer Cohorts (Per Segment, With Filing Citations)

Global Water (reported)

Global Institutional & Specialty (reported)

Global Life Sciences (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

View the full interactive ECL report on boothcheck