Ecolab stock: dividend aristocrat gets overbought at a record high

By: Invezz

Ecolab (NYSE: ECL) stock price has had a great start to the year as it outperformed the Nasdaq 100 and S&P 500 index. It has surged by over 16% in 2024 and by 44% in the past 12 months. This makes it one of the best-performing industrial companies in the United States. 

Dividend aristocrat is booming

Ecolab is not a well-known brand name in the United States. Yet, it is one of the most popular companies in industries that it dominates. It is also a well-known dividend aristocrat that has boosted its payouts for over 31 years.

Ecolab operates in many industries, where it provides essential products in key areas like water, food and beverage, paper, institutional, and specialty. It also provides its solutions to companies in the healthcare and life sciences businesses.

Ecolab has been growing its business both organically and through acquisitions. Its annual revenue has soared from $12.7 billion in 2021 to $15.3 billion in 2023. This growth was partially because it acquired Purolite in a $3.7 billion deal.

Ecolab’s profitability has been growing gradually. After making a $12 billion loss in 2020, it recovered to $12 billion in 2021 and $1.3 billion in 2023. The most recent results showed that Ecolab’s revenue rose by 7% in Q4 to $3.95 billion.

Ecolab expects that its growth will continue this year. Its Q1 adjusted earnings are expected to be between $1.27 and $1.37. For the year, management sees it growing to between $6.10 and $6.50. 

It is easy to make a bullish case for Ecolab stock. Technically, as shown below, it sits above all moving averages while oscillators point to strong bullish momentum. 

Fundamentally, Ecolab is a company with a near monopoly in key industries. It also has decades of relationships with the biggest companies in their respective industries. Most importantly, it has a good record of paying and raising dividends while its revenue and profitability are expected to continue rising.

However, there are concerns about Ecolab’s valuation. The company trades at a hefty valuation, with a forward PE ratio of 36.12 and a forward EV to EBITDA ratio of 21. These are hefty numbers considering that the sector median of the two are 16.8 and 8.61.

Still, analysts are bullish on Ecolab’s shares. 12 of the 22 analysts tracking the company have a buy rating while 9 have an underperform view. The most bullish of these analysts are from Barclays and Wells Fargo.

Ecolab stock price forecastEcolab stock

ECL chart by TradingView

The weekly chart shows that the ECL share price has been in a strong bullish trend in the past few months. It has jumped and moved to a key resistance point, with the current price being its highest swing in November 2021. This price was the previous all-time high.

The stock still sits above all moving averages while the Average Directional Index (ADX) has moved above 40. The Relative Strength Index (RSI) has also pointed upwards and moved above the overbought level.

Therefore, my view is that Ecolab’s stock price will go through a short pullback before continuing its bull run. This could see it crash to $200 and then resume the uptrend.

The post Ecolab stock: dividend aristocrat gets overbought at a record high appeared first on Invezz

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