DCF Studio

    ECL · NYQ · Basic Materials

    Ecolab Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 80.93

    Market price

    USD 269.46

    Implied upside

    -70.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 21.7x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 80.93-70.0%
    Exit multiple
    USD 201.66-25.2%
    Market price
    USD 269.46

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn1bn3bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 16.8bnUSD 17.5bnUSD 18.2bnUSD 19.0bnUSD 19.8bn+4.3%
    EBITUSD 2.5bnUSD 2.6bnUSD 2.7bnUSD 2.9bnUSD 3.0bn+4.3%
    NOPATUSD 2.1bnUSD 2.2bnUSD 2.3bnUSD 2.4bnUSD 2.5bn+4.3%
    Add depreciation & amortisationUSD 1.0bnUSD 1.1bnUSD 1.1bnUSD 1.2bnUSD 1.2bn+4.3%
    Less capital expenditureUSD -960.7mUSD -1.0bnUSD -1.0bnUSD -1.1bnUSD -1.1bn+4.3%
    Less increase in working capitalUSD 98.5mUSD 102.7mUSD 107.1mUSD 111.7mUSD 116.4m-4.3%
    Free cashflow to firmUSD 2.3bnUSD 2.3bnUSD 2.5bnUSD 2.6bnUSD 2.7bn+4.3%
    Discount factor0.95580.87320.79780.72890.6659-
    Present valueUSD 2.2bnUSD 2.1bnUSD 2.0bnUSD 1.9bnUSD 1.8bn-4.7%
    Present Value Of The ForecastUSD 9.8bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.926Reported 0.890, pulled toward 1.0 (Blume)
    Cost of equity10.09%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 75.5bn89.4% of capital
    Total debtUSD 9.0bn10.6% of capital, book value as a proxy
    Tax rate17.6%Effective, capped at statutory
    WACC9.46%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 80.93

    69% of EV

    Forecast FCFF, final year
    USD 2.7bn
    Capex at depreciation, working capital in reinvestment
    USD 2.8bn
    Less reinvestment at g/ROIC (21.0% of NOPAT)
    USD -584.5m
    Capitalised
    USD 2.2bn
    ROIC (reported)
    11.9%
    Terminal value, undiscounted
    USD 32.5bn
    Terminal value, discounted
    USD 21.6bn
    Enterprise value
    USD 31.4bn
    Less net debt
    USD 8.4bn
    Equity value
    USD 23.1bn

    Exit at 20.0x EBITDA

    Value per shareUSD 201.66

    85% of EV

    Terminal value, undiscounted
    USD 84.2bn
    Terminal value, discounted
    USD 56.1bn
    Enterprise value
    USD 65.9bn
    Less net debt
    USD 8.4bn
    Equity value
    USD 57.5bn

    Spread between methods: 85%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.46%112.07116.75122.32129.08137.46
    8.46%92.4395.1098.17101.75106.00
    9.46%77.7179.2380.9382.8585.05
    10.46%66.2767.1068.0068.9870.06
    11.46%57.1357.5257.9358.3658.80

    Outlined: this model. Green text: above today's price of 269.46. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year4.3%28.9%+24.6pp
    EBIT margin15.1%43.9%+28.8pp
    Discount rate9.5%4.9%-4.5pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.