Ecolab Inc. (ECL)

Total return at 5 years: -3.2%/year = -4.8% appreciation + 1.6% dividend. The target price ($218) is ex-dividend; the $20 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $275 · Multiples $192) is below the market price ($279).

Today — expensive, no margin of safety: at $279 trades ~45.3% above its value discounted to today (~$192); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$121.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($279) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The implied growth (7.8%/year) is in line with our base case (7.5%/year) → the price is consistent with the projection.

That growth implies ~$3.6 bn of owner earnings in year 5 (vs ~$3.6 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on Utilidad neta comparable (P/E). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Year 0 = TTM as of Jun-30-2026 (rolling grid, 10-Q filed 2026-08-06, already ingested in the XBRL: the pipeline's TTM is correct, no rebasing needed). Two methodology notes: (1) TTM depreciation and amortization is not taken from the XBRL tag (us-gaap:DepreciationDepletionAndAmortization has been stale since 2012); the sum of Depreciation ($672.6M) + Amortization ($303.8M) from the FY2025 consolidated cash flow statement ($976.4M) is used, taken as a proxy for the TTM window in the absence of a disaggregated quarterly figure in the available sources. (2) The FY2025 segment cross-foot (Note 18 of the 10-K, at constant currency): Global Water $7,679.9M, Institutional & Specialty $5,962.0M, Pest Elimination $1,219.2M, Life Sciences $706.1M, subtotal $15,567.2M -reconciles to consolidated GAAP of $16,081.2M via the currency-translation effect of +$514.0M disclosed in the same note, with no residual discrepancy-. Year 1 starts from the 2Q26 earnings release's guidance (8-K, Jul-28-2026, Item 2.02): organic sales growth of 6-7% for 2H26 and organic operating margin of ~19-20%, plus FY2026 adjusted earnings per share of $8.05-$8.25 (+7-10% vs. the $7.53 adjusted for 2025). The TTM is already running at +7.1% year over year (versus +2.2% for the full FY2025), validating the guided acceleration. The base case starts at +7.0% (within the guided range) and decays smoothly and geometrically (a constant ~0.6pp/year step) to +4.5% in year 5 -within the 3-6% band of durable consumer-staple growth-. The bear stresses year 1 at +4.5% (half of the acceleration does not hold) decaying to +3.0%; the bull starts at +7.5% decaying to +5.5%, without exceeding the archetype band's ceiling. Margins: TTM GAAP operating margin is 16.94% (EBIT $2,852.1M / revenue $16,842.5M), slightly below FY2025's full 17.0% on the capex acceleration. Expansion toward 18.6% (base case) is projected, reflecting the dilution of 2025's special/restructuring charges ($147.9M pretax, 0.9% of sales) and the consolidation of the energy surcharge. The tax rate (17.8%) is the real effective XBRL rate, not a "typical" one. Capex and D&A grow in line with revenue, reflecting the ongoing rollout of dosing/monitoring equipment (3D TRASAR) and the integration of Purolite/Ovivo/CoolIT; maintPct=0.5 by default (no evidence total capex materially and sustainably exceeds depreciation). cajaStart=0 and deuda=0 in the common inputs: funding is already embedded in net income via interest expense (P/E on levered net income), consistent with the convention for a consumer-staple archetype with no separate financial piece. Recent net buyback is material (~1%/year, accelerating: TTM $1,253.9M vs. $783.8M in FY2025) and is modeled via an identical sharesPath across the three scenarios (a capital-return policy, not a business variable), with real fcfLtm/buybackLtm from the XBRL feeding the capital-allocation cascade (combined TTM payout ~110% of reported FCF, consistent with a buyback partially funded above the period's pure FCF).

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $218 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $279, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $218 in 5 years plus $20 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $192. Against the current market price ($279), the margin of safety is -45.3% (trades above the maximum → a premium is paid) and the total return at that price would be -3.2% annually.

• Entry multiple. ~37x TTM earnings, well above the ceiling of the [16-22x] band of a consumer staple.
• Margin of safety. No margin of safety: the price already discounts a demanding scenario.
• Projected total return. The base case projects a -3% annual return over 5 years, below the method's minimum hurdle even including the dividend.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (116%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. TTM FCF of $1,874.5 million, slightly below FY2025's, on the acceleration of growth capex (dosing/monitoring equipment).
• ROIC vs. the 10% bar. ~13% on real invested capital from the balance sheet (equity + debt − cash) -above the bar, in the "good" band.
• Earnings quality. The TTM net margin (12.6%) is depressed by $147.9 million of special/restructuring charges in 2025; without them, recurring earnings are somewhat higher than reported.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Ecolab does not publish volume-type KPIs such as GMV or active users: it is a business selling chemical products/equipment plus technical service, and its verifiable drivers are financial. Four series were chosen that capture the full story: the level of revenue and its GAAP operating margin (quality of growth), and capital allocation via dividend and buyback (34 years of increases, buyback accelerating in the TTM). Organic growth by segment (2%-5% reported, up to ~7% in Pest Elimination and Life Sciences measured against the restated 2025 figures) lives in growthBreakdown.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Recent acceleration. TTM revenue +7.1% versus +2.2% in FY2025, validated by the company's guidance of 6-7% organic growth for 2H26.
• Sustainability. Part of the acceleration depends on the energy surcharge holding; without that pricing, organic growth returns to 2-3% levels.
• Reinvestment runway. TTM capex rising ($1,182.3 million), consistent with the ongoing rollout of equipment and the integration of acquisitions -an active, not exhausted, reinvestment runway.

• Recurrence and switching costs. Multi-year contracts and equipment installed at the customer's plant create sticky relationships, tempered by the same pricing limitation those contracts impose.
• Pricing power. The energy surcharge lifted consolidated pricing to +4% in 2Q26, evidence of the ability to pass through costs without material volume loss.
• Geographic and segment diversification. 47% of sales outside the U.S. and four segments with similar economics; product concentration in warewashing (~13%) is the exception to watch.
• Capital cycle / competition. A market led by a few large companies in Water and Institutional, with numerous regional players competing on price in the smaller segments -the moat protects but does not fully insulate.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• ✓Interest coverage (EBIT / interest)12.8x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 116% of ROIC
• !Value creation (ROIC − 10% bar)+3pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.2x
• –Float / working capitalNeutral WC
• ✓Dilution (SBC % of revenue + shares)SBC 0.8% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage. Total debt $13,170.8 million vs. equity $10,055.5 million; net debt ~$8,035 million -manageable, with no signs of stress.
• Interest coverage. TTM EBIT ($2,852.1 million) amply covers the estimated interest expense (~$222.4 million), more than 12 times over.
• Liquidity. Cash of $5,135.3 million as of Jun-30-2026, sufficient for short-term debt service ($1,265.7 million).

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Capital allocation. 34 consecutive years of dividend increases and sustained buybacks; the combined payout (dividend + buyback) ran above reported TTM FCF, funded in part with debt/cash.
• Skin in the game. Directors and executives as a group own only 0.5% of the shares; the largest shareholder (Gates, 12.18%) is a long-term outside holder, not an operating founder.
• M&A track record. Recent acquisitions (Purolite, Ovivo Electronics, CoolIT) expand the business into biopharma and data centers; accumulated goodwill ($9,200 million) is exposed if they underperform.

• The market pays a sustained premium for Ecolab's quality and predictability: 34 consecutive years of dividend increases and a consolidated moat in industrial water and hygiene services support a multiple historically above that of a typical consumer staple.
• The narrative of water scarcity and industrial efficiency (more recently, data-center cooling demand via CoolIT/Ovivo) sustains growth expectations above those of a conventional consumer staple.
• The recent acceleration in organic growth (TTM revenue +7.1% versus +2.2% in FY2025) and the elevated FY2026 guidance reinforce the market's optimism, already embedded in the price.

At $278.97, ECL trades at ~37 times TTM earnings -well above the ceiling of the [16-22x] band of a consumer-staple archetype-. The method finds no margin of safety: the price already pays for exceptional quality and a growth acceleration that still has to be sustained for several years to be justified.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -10%/year (-40% total): the margin of safety protects the downside. The bull (+1%/year, +3% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Valuation risk. The market price already embeds a quality and growth acceleration that the method cannot validate within the archetype band.
• Currency/tariff risk. 47% of sales outside the U.S., with new tariffs in 2025 and the risk of devaluations eroding dollar-denominated revenue.
• Goodwill risk. $9,200 million of goodwill from recent acquisitions, exposed to impairment if the expected cash flow does not materialize.
• AI risk. An expanded section in the most recent 10-K on operational, legal, reputational, competitive, and cybersecurity risks arising from AI adoption.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 13% above the 10% bar, but the price sits above value (no margin) → great business, expensive.

• Peter Lynch Growth at a reasonable price (GARP)

  A cyclical growing 8% at a PEG of 5.0 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 4% (EBIT/EV) + ROIC 13% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 8%, in line with our 8%: perception and reality aligned.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -12%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, switching costs, cost advantage → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting 8%, within what we project (8%) — the story squares with the numbers.