Applied Materials (AMAT) produces semiconductor fabrication equipment, including products used in de...
Top Picks 2021: Ecolab (ECL)
01/14/2021 5:00 am EST
Ecolab (ECL) is a leader in water, hygiene, and energy technology and services. The company delivers comprehensive solutions to promote safe food and maintain clean environments, explains David Coleman, of Argus Research, a leading independent Wall Street research firm.
The firm's solutions also optimize water and energy use, and improve operational efficiency for customers in the food, healthcare, energy, hospitality, and industrial sectors.
In our view, the company has prospects for above-average revenue and earnings growth over the long term, though current estimates have been revised lower due to economic uncertainty. On the other side of the pandemic, we expect Ecolab’s water treatment, sanitation, and healthcare cleaning services to be in strong demand.
The company continues to tweak its portfolio of businesses to optimize growth, and management has divested a lower-margin segment, which should boost profitability in 2021-2022. Ecolab has a clean balance sheet and an impressive history of dividend payments and growth.
The shares are a suitable core holding from the Materials group in a diversified portfolio. Non-fundamental selloffs often represent good buying opportunities for this diversified company.
We think that ECL shares are attractively valued at current prices near $225. Ecolab shares have traded between $124 and $231 over the past 52 weeks and are currently at the high end of the range.
MoneyShow’s Top 100 Stocks for 2021
The top performing newsletter advisors and analyst are back, and they just released their best stock ideas for 2021. Get your FREE copy of MoneyShow’s 2021 Top Picks report here and see why the nation's leading investment experts believe these stocks will significantly outperform the market in 2021.
From a technical standpoint, prior to the pandemic, the shares had been in a bullish pattern of higher highs and higher lows that dated from February 2016. Since the pandemic, the positive pattern has re-emerged.
On the fundamentals, the shares are trading at 42-times our 2021 EPS forecast, compared to a five-year annual average range of 20-45. They are also trading at a trailing price/book multiple of 6.8, above the midpoint of the historical range of 3.0-7.5; and at a price/sales multiple of 4.4, at the high end of the historical range of 1.6-4.4.
Our dividend discount model, factoring in the latest dividend hike, renders a fair value near $275 per share. Blending our approaches, and discounting multiples to reflect the current market uncertainty, we maintain our "buy" rating and arrive at a revised price target of $250.
Related Articles on TECHNOLOGY
My top picks for 2021 come out of the small-cap portion of our annual “Best Months” Stoc...
Coca-Cola (KO), based in Atlanta, is a leading producer of soda, juices and juice drinks, and ready-...
Broadcom (AVGO) is global infrastructure technology leader and an industry Goliath with $24 billion ...