Few companies have banked more cash taking out the trash and cleaning up the joint as Ecolab (ECL), a global leader in cleaning and sanitation, suggests Steve Mauzy, editor of Personal Wealth Advisor

Ecolab has been plying its mundane, but necessary, trade for a while, both as a private and as a publicly traded entity. We’re talking decades, many decades. An investment in the stock taken anytime over the past 40, 30, and 20 years has easily beaten the S&P 500.

Ecolab provides the products and services that help its hospitality, food-service, and healthcare customers clean the laundry, wash the dishes, decontaminate the water, and adhere to regulatory environmental standards.

It’s not just the United States. Ecolab really is global. It operates in 170 countries. It really is the leader. Ecolab accounts for roughly 9% of the $152 billion sanitation global market. Ecolab generated $14 billion in revenue over the trailing 12 months serving its global customers.

Size can imbue a company with an economy of scale that the smaller fry are unable to match. For companies expanding their national footprint, Ecolab is the preferred cleaning supplier. Ecolab’s scale ensures uniform cleaning standards for its customers. It helps them maintain the same cleaning process across the enterprise, thus lowering cleaning costs while adhering to quality standards.

Ecolab’s razor-and-blade business model further extends its competitive advantage. Ecolab leases its proprietary cleaning equipment and devices at the most competitive prices. But there is a catch to the bargain. The equipment and devices are designed to be used only with Ecolab’s proprietary consumable products. 

This razor-and-blade business model not only ensures repeat sales, it ensures predictable sales because of the high costs customers incur by switching to a competitor. It engenders Ecolab with pricing power and customer loyalty few of its competitors can match.

Ecolab’s burgeoning water-treatment business should be a growth driver over the next decade. Ecolab is also expanding its life sciences and healthcare business.

Inflation has been a weight on Ecolab shares for the past year and the shares are down 36% from their all-time $239 high set in December 2021. I think investors are too myopic in their outlook. I expect to see improvement as the year progresses. Management suggested as much during a recent analysts’ meeting. 

While focusing on inflation, investors are overlooking a very durable, proven business model with decent growth prospects. I like the value proposition today — growth at a reasonable price. I think the potential reward Ecolab shares offer easily exceed the limited downside risk.

Subscribe to Personal Wealth Advisor here…