Last update on 2024-06-05

Ecolab (ECL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Explore Ecolab (ECL) 2023 Piotroski F-Score analysis, ranking 8/9 on financial health, profitability, and efficiency metrics.

Short Analysis - Piotroski Score: 8

We're running Ecolab (ECL) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Ecolab (ECL) scored 8 out of 9 in the Piotroski F-Score, indicating a strong financial position. Key findings: positive net income and cash flow, improved return on assets, high-quality earnings indicated by operating cash flow exceeding net income, and reduction in leverage. However, the current ratio slightly decreased, indicating less liquidity. Ecolab's gross margin and asset turnover improved, and shares outstanding slightly decreased, indicating management confidence. Overall, Ecolab shows solid profitability, efficient operations, and sound financial health.

Insights for Value Investors Seeking Stable Income

Ecolab (ECL) is worth considering for investment due to its high Piotroski F-Score of 8, signifying strong profitability, efficient operations, and robust financial health. The company's ability to generate positive net income and cash flow, along with improved return on assets, supports its resilience. Although there are minor liquidity concerns, the overall positive trends in earnings quality, leverage reduction, and asset efficiency make Ecolab a potentially attractive investment option for investors looking for financially solid companies.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Ecolab (ECL)

Company has a positive net income?

Determining the net income is fundamental as it indicates profitability. Businesses strive for consistent profit generation, making this metric crucial for stakeholders.

In 2023, Ecolab (ECL) recorded a net income of $1,372,300,000, which is positive, earning a score of 1 point. Over the past 20 years, Ecolab's net income trends show steady growth with some fluctuations. Key high points include $1,502,000,000 in 2017 and a concerning dip to -$1,205,100,000 in 2020, likely due to the global pandemic impact. The latest positive net income reflects Ecolab's resilience and recovery.

Company has a positive cash flow?

Cash Flow from Operations gauges the actual cash a company generates from its normal business operations, which is crucial for sustainability and growth.

For Ecolab (ECL), the Cash Flow from Operations (CFO) in 2023 is 2.41 billion USD, which is positive and therefore earns 1 point. Over the past 20 years, Ecolab has consistently displayed robust CFOs, reflecting a positive trend. It's notably high compared to 2022's 1.79 billion USD, an increase of approximately 34.9%. This trend supports the firm's efficient cash management.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) signifies the company's efficiency in generating profits from its assets. A positive change usually indicates better performance and efficient asset utilization.

Ecolab's ROA has improved from 0.0512 in 2022 to 0.0634 in 2023, thus earning 1 point as per Piotroski's criteria. This positive increase is a strong indicator of improved operational efficiency and profitability of the company. A 12% rise in ROA within a year is significant and suggests that Ecolab has managed its assets more effectively. Over the past 20 years, however, the industry's median ROA has been notably higher, oscillating around 0.3. Such a comparison suggests that while Ecolab has shown improvement, it still lags behind its industry peers in asset efficiency.

Operating Cashflow are higher than Netincome?

Evaluate whether Ecolab's operating cash flow is higher than its net income and why it matters.

In 2023, Ecolab's operating cash flow was $2,411,800,000, and its net income was $1,372,300,000. Since the operating cash flow is significantly higher than the net income, this indicates a high-quality of earnings. It signifies that Ecolab is generating robust cash flows from its operations relative to the net income, suggesting efficient cash management and profitability not reliant on non-cash items. This trend indeed is positive and scoring 1 point in the Piotroski analysis is justified.

Liquidity of Ecolab (ECL)

Leverage is declining?

Change in Leverage determines the change in the company's financial risk.

In 2022, Ecolab (ECL) had a leverage of 0.392, which decreased to 0.3651 in 2023. This decline in leverage is considered favorable as it indicates a decrease in financial risk, giving Ecolab an additional 1 point in the Piotroski analysis. Historically, the leverage trend of Ecolab has fluctuated but has shown a general tendency to increase in recent years. The current decline, therefore, can be seen as a positive development for the company's financial health.

Current Ratio is growing?

The Current Ratio compares a company's current assets to its current liabilities, measuring liquidity.

The Current Ratio for Ecolab slightly decreased from 1.3049 in 2022 to 1.2987 in 2023. While this is a minimal decline, it indicates a slight decrease in liquidity. Given that the ratio is below the industry median of 1.9399 in 2023, it suggests Ecolab may have less flexibility compared to its peers. This means no point in the Piotroski Analyses for this criterion.

Number of shares not diluted?

Change in shares outstanding measures the change in the number of shares circulating in the market. A decrease may indicate management confidence and efficient capital allocation.

Comparing the outstanding shares of 285.2 million in 2022 with 285 million in 2023, it's apparent that the shares outstanding decreased. This change, though minimal, suggests a slight buyback or reduction in shares. Historically, Ecolab (ECL) has had shares fluctuations, notably rising significantly in 2012, likely due to equity financing. In 2023, the decrease yields a score of 1 point in the Piotroski analysis, indicating a minor positive sign for shareholders.

Operating of Ecolab (ECL)

Cross Margin is growing?

The Change in Gross Margin indicates if the company's profitability is improving. An increase suggests better profit efficiency.

For Ecolab (ECL), the gross margin has increased from 0.3776 in 2022 to 0.4024 in 2023. Thus, Ecolab earns 1 point for this criterion. Analysis of the trajectory over 20 years shows a notable variability. Despite fluctuations, Ecolab often outperforms the industry median. The data suggests the company's operational efficiency improved in the past year. Monitoring long-term trends can offer valuable insights into the company's profitability stability.

Asset Turnover Ratio is growing?

Asset turnover measures how efficiently a company uses its assets to generate sales. An increase signals better efficiency and operational performance.

The asset turnover ratio for Ecolab (ECL) in 2023 stands at 0.7075, compared to 0.665 in 2022. This improvement indicates better asset utilization and efficiency in generating sales, a positive trend reflected by the increase of 0.0425. Thus, 1 point is awarded here. This uptick also suggests a reversal from the lower efficiency levels witnessed in previous years, as seen in the historical data provided.